Q1 2025 Orla Mining Ltd Earnings Call
Regina: Good morning, ladies and gentlemen and welcome to Orla Mining's conference call for the first quarter 2025 results. My name is Regina and I will be your conference operator today.
Regina: All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. 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, press star one a second time.
Speaker Change: 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, 2020-5 Results Comments Call. We will be making four of the mistakes during this call, and I would direct it to the second and third slide for the foundation which contains important cautioning notes regarding these four mistakes.
Speaker Change: All dollar remains discussed today will refer to US dollars, unless otherwise we retain them. The Orla Executive is on close more, and I'll pass the call to Jason Simpson, president is here.
Thanks, Andrew.
Speaker Change: We recorded our first month of production from our newly acquired Muscle White Mine which drove a record quarter of gold production for Orla.
Speaker Change: We continue to advance our exploration and development projects in Mexico and Nevada, and now have begun our exploration program in Canada.
Speaker Change: With the integration of muscle-white underway, we are aggressively investing in exploration and investing capital into the operation.
to improve mining rates and extend mine life.
Speaker Change: As we communicated about muscle weight, we see great geologic potential which could add to fine light and the annual gold production from this asset.
Speaker Change: As such, we are updating our 2025 guidance today, inclusive of the new investment at Muscle White.
Speaker Change: We are pleased to provide updated production guidance for 2025 of 280 to 300,000 ounces of gold at consolidated cash costs of $850 to $1,050 per ounce.
Speaker Change: and all in sustaining costs of 1,300 to 1,500 dollars per ounce of gold sold.
Speaker Change: This includes 170 to 180,000 ounces of gold expected from Muscle White from March to December
Speaker Change: Cost Guidance at Musawite is provided for April to December with expected cash costs of $1,000 to $1,200 per ounce.
and all in sustaining costs.
of $1,550 to $1,750 per ounce of gold sold.
Speaker Change: Production guidance at Camino Rojo is unchanged at 110 to 120,000 ounces of gold.
Speaker Change: At an asset level, cash costs are expected to be between $625 to $725, and all insustaining costs is expected to be between $700 and $800 per ounce.
Speaker Change: This cost guidance is in line with initial guidance but reflected net of the corporate overhead.
Speaker Change: We've also updated our exploration, capital, and development guidance for the year to include our investment in future production growth at Muscle White.
Speaker Change: The consolidated total investment across our business in 2025 is approximately $175 million, including exploration.
Capital,
Speaker Change: Project Costs with $115 million of this total related to Muscleway.
Speaker Change: This investment represents an improvement from the minute out scenario outlined in the Reserve Only Technical Report.
Speaker Change: We believe this is what the operation requires to take it to the next level in terms of productivity and mind-life extension.
Speaker Change: Most of the investment relates to underground lateral development, to improve or availability and efficiency for future years, as well as access for underground exploration drilling.
Speaker Change: The balance of the investment is to be spent on exploration and improving the underground mobile equipment.
Speaker Change: Total Exploration Spending Plan for 2025 Inclusive of Muscle White is approximately $55 million. A testament to our commitment to growth through discovery and resource addition.
Speaker Change: Andrew Cormier, our Chief Operating Officer, will now discuss our operating performance.
John Tumazos, Andrew Bradbury, Chafika Eddine
Speaker Change: Thank you, Jason. Our operating team in Mexico delivered another strong quarter or meaning committed to the health and safety of our employees.
https://www.youtube.com
Speaker Change: During the quarter, Camino Rojo, by nearly 1.9 million tons of ore, at a stripper's show of 1.48.
Speaker Change: The strip ratio is a result of a mine-pid redesign in 2024 to ensure consistent access to or to maintain balance production.
Speaker Change: The average gold grade stacked straight the first quarter was 0.78 grams per tonne in line with our plan.
Speaker Change: We also achieved an average stacking rate of 18,600 tons of ore per day.
Speaker Change: We produce nearly 30,000 ounces of gold in a quarter, which is on track to achieve our annual production guidance of 110 to 120,000 ounces.
Speaker Change: Permitting of our expansion in Mexico continues and we have maintained regular engagement with federal and state-level stakeholders regarding our application.
Speaker Change: In Canada, we recorded our first month of production from Musawite following closing of the transaction on February 28th.
Speaker Change: In March, Musawait Maid, Maid, 108,000 tons of ore and milled 104,000 tons at a mill head grade of 5.55 grams per tonne gold.
Speaker Change: Gold recovery rates of 95.7% resulted in gold production of nearly 18,000 ounces of gold.
Speaker Change: Wilts Groupwood in Merch was 3,360 tons per day, a 10% improvement from the average
Speaker Change: Our investment in the muscle oil mine has already begun with new underground mobile equipment purchased and already arriving on site.
Speaker Change: The Equipment Purchased and Feet Rebuilding Plan will continue throughout the year.
Speaker Change: As Jason mentioned, our 10 month production guidance for Muscle White in 2025 is 170 to 180,000 ounces of gold at $1,000 to $1,200 cash cost.
and $1,550 to $1,750 per ounce voltage.
All in sustaining costs.
Speaker Change: muscle weight production guidance is from March to December while cost guidance is for April onwards
Under a Perfect Pipeline and Upcoming Milestones
Speaker Change: We have had constructive meetings with the Department of Interior and the Acting Director of the BLM on the Congress of our South Railroad project permitting.
Speaker Change: We continue to target the notice of intent being published mid 2025 with the record of decision
which would position us to begin Earth Movement next year.
Speaker Change: We are encouraged by the momentum being seen in advancing American mineral production by the faith of the U.S. Administration.
Speaker Change: This was most recently displayed by the Executive Order Supporting Development of Critical Minerals which has been expanded to include gold.
Speaker Change: We have also purchased a portion of the water rates required for the operation.
Speaker Change: Our project team continues to work with M3 on the Engineering for the project, potentially leading to procurement in the second half of 2025 to be prepared for on-site construction starting after the record of decision.
Speaker Change: So then, we'll discuss the commuter robots, robots sulfites, later in the call, and we are progressing towards an upcoming milestone.
Speaker Change: Eddine Morin, or Chief Financial Officer, will now discuss financial results for the quarter.
Speaker Change: Thanks, Andrew. It's worth addressing from the top that because of the mid-quarter closing of the Muscle White acquisition in February , we acknowledged that this is a transitional and complex reporting period, and that is reflected in our financial results.
Speaker Change: During the quarter, we sold 46,000 ounces of gold at Realized Price of $2,915 per ounce, resulting in approximately $141 million in revenue for the quarter.
This includes one month of must-of-white goaltales.
Speaker Change: Cash Carts and Nolan sustaining costs for the first quarter total $597, and $845 per ounce of gold
Speaker Change: Noncash accounting treatments impacting cost of sales. So as a result, we felt that the calculation of cash costs and all in sustaining costs at musselwhite will not be representative of the performance of the mind for that period, but starting in the second quarter Musselwhite costs will be included in the computation of both cash costs and all in sustaining cost.
Speaker Change: We recorded a net loss for the quarter of $70 million or 22 per share mainly driven by the impact of financial instruments issued in connection with the acquisition of Musselwhite.
Speaker Change: So after adjusting for the impact of these financial instruments and a few other small items. Our adjusted net earnings were $38 $6 million 12 per share.
Speaker Change: Cash flow from operating activities before changes in noncash working capital was $401 million or $1 24 per share for the quarter. This was impacted by the proceeds received from the gold prepay and I'll expand on that on the next slide.
Speaker Change: Our total cash capital expenditures for the quarter, including capitalized exploration or $17 7 million of which $9 2 million was non sustaining and related to capitalized exploration in Mexico and also related to the purchase of water rights in Nevada.
Speaker Change: And also $8 5 million was sustaining which the majority was relating to the mine development and equipment purchases at musselwhite.
Speaker Change: On the next slide we're showing a reconciliation of net income to adjusted earnings. The point here is to highlight some of the significant items, specifically related to the musselwhite acquisition, which impacted our net earnings this quarter.
Speaker Change: Items, such as transaction costs, and the fair value adjustment of the metal inventory of one time items with our certain financial instruments that will be fluctuating each quarter and we're providing a breakdown of those on the next two slides.
Speaker Change: So as a result of the closing of the Musselwhite transaction, we recorded charges of $81 million related to changes in the fair value of financial instruments issued in connection with the acquisition. This includes this includes the closing out of the go forward contracts, which we have now replaced by the gold prepay the warrants and the.
Speaker Change: Redemption rate issued in conjunction with the convertible notes and a contingent payment portion of the musselwhite purchase price.
Speaker Change: So although the gold prepay is considered considered more of a financing item because it's treated as deferred revenue and not a financial instrument. It will now flow through cash flow from operating activities. Therefore, as we continued to deliver gold ounces against the prepay obligation will draw down deferred revenue on our balance sheet and we will recognize.
Speaker Change: That revenue on the income statement, but since we won't be receiving cash for those ounces delivered it will reduce our cash flow from operating activities Accordingly.
Speaker Change: The contingent consideration associated with the purchase price of Musselwhite is recorded as a liability that is we estimated every quarter and since the contingent consideration is linked to gold price as the gold price increases the probability of payment and also increases and therefore, our financial liability increases as.
Speaker Change: Well this is mark to market each quarter based mainly on gold price performance.
Speaker Change: Also note that this liability is capped at $40 million of which we have recognized $28 million to date.
Speaker Change: And the last item to mention is the impact of the warrants we issued in conjunction with the convertible notes as the warrants are denominated in Canadian dollars and order to Canada as a U S functional currency entity. The warrants are treated as a financial instrument and therefore, mark to market each quarter and with the recent share price performance.
Speaker Change: <unk>. This has created an increase in the liability of that financial instrument.
Speaker Change: That treatment will remain in place until the earlier of the exercise of those warrants or their expiring.
Speaker Change: So we've added some more details on each item in the table on the next slide for added clarity, but we are available to discuss the accounting mechanics of these adjustments in more detail at anytime. So please do not hesitate to reach out to us.
Speaker Change: Following the closing of the after the acquisition and Musselwhite. The company's current outstanding debt balance is $150 million with net debt of approximately $266 million our cash balance at the end of the first quarter was $184 million.
Speaker Change: We intend to use our strong cash generation from our two operations now to Delever in the near term. While we also prepared to fund the construction of our South railroad projects and a robust exploration program, which our senior Vice President exploration Sylvain Guerard, who will now provide you with an update.
Speaker Change: Yes.
Sylvain Guerard: Thanks, Tim and during the first quarter in Mexico The company begin to.
Sylvain Guerard: Infill drill program of gains related to the extension of the Kevin will walk, though some flights.
<unk> Global leader group overall is still listening well.
Sylvain Guerard: The long drug for completion in the third quarter of 2000.
Sylvain Guerard: The results from the current rig program.
Speaker Change: Paul you sold 122 resources to move which is expected to be included.
Speaker Change: As part of the upcoming chemical work long ago, where all of these.
It was stable in the <unk>.
Speaker Change: Second quarter 2025.
Speaker Change: We remain campaign two does it can work well with the AG loans.
Speaker Change: Begin with diesel.
Speaker Change: In Nevada, <unk> 'twenty 'twenty four is exploration program for Salt tolerant complex, it's focused on increasing near deposit oxide resources at Pinyon in gold Star.
Speaker Change: Advancing its satellite deposit and discovering new zones of oxide mineralization.
Speaker Change: Drilling initiated in the first quarter was pools due to weather conditions, but is expected to resume in may.
The reserve and resource update for the Salt volume project is underway with completion planned for mid 2025.
Speaker Change: In Canada, we have commented 20 million towards exploration of muscle and what the.
Speaker Change: The goal is to define the critical mass in leather Shlomi organization to support future expansion of the operation.
Speaker Change: And significantly extend the mine life well beyond 2030.
It's sorry, Carla Bruni located one kilometer from the current resource area. The main trends tend to affected strongly innovation supporting the non <unk> constant new GM highlighting the potential for.
Speaker Change: One that two two kilometer extension.
Speaker Change: On the ground winning multiple awards beginning in early March immediately following completion of the acquisition.
Speaker Change: Surface drill programs targeting the bank loan extension of the mine trend and the key near mine target areas are scheduled to commence in Q2 and continued through year end.
Speaker Change: Sure.
Speaker Change: Our chief Sustainability Officer with mall provides an uptick.
Speaker Change: Thank you Suzanne in regards to ESG disclosure during this quarter, we have completed <unk> second modern slavery report in alignment with the filing of forced labor and child Labor and supply chains Act, which came into force in Canada last year.
The act requires companies to report on their efforts to combat forests, and child labor and their operations and supply chain.
Speaker Change: Our 2024 report will be mailed to shareholders on May 16, and provides updates on our work to enhance margins labor the training across the company and strengthening the process of access to assess risk of modern slavery in our supply chain.
Speaker Change: We are also actively working on the 'twenty 'twenty four or less sustainability report and are on track to published a report by the end of summer.
Speaker Change: During the first quarter, we continued our community engagement and strategic investment initiatives at Camino Rojo and calculate road, while maintaining a focus on environmental performance and fulfilling our social commitments.
Speaker Change: With the closing of the acquisition of Musselwhite, We hosted our first community Bank in Thunder Bay to introduce OLED to community and engaging with partners and continue to build relationships that are critical to our collective success.
Speaker Change: For context, the Musselwhite mine is located on the traditional territory of North Caribou late for installation and it was one of the first lines in Canada to enter into a comprehensive agreement with Frac Nations clean.
Speaker Change: These agreements focus on respectful and trust based relationships for our mutual benefit and include areas, such as employment and training environmental and cultural heritage protection and business opportunities.
Speaker Change: On the depot front in the first quarter, we continued to prioritize that Louis transmission project NASA, right mind and welcoming new team members.
Speaker Change: With that Jeff.
Dave: This call back to Dave.
Silvana: Thanks, Silvana to recap in the first quarter <unk> closed the acquisition of Musselwhite and integration of the operation into our business is progressing well.
Silvana: We are pleased to show a record quarter with only one month of musselwhite production contribution.
Silvana: The updated guidance to date reiterate how musselwhite will more than double our production.
Silvana: We see further mine life potential at this operation, which is why we have launched an aggressive exploration program at the property to define additional reserves and resources to support mine life extension and potential expansion of the operation.
Silvana: Looking forward, we have several upcoming catalysts for <unk>, including the.
Silvana: The initial underground resource for Camino Rojo, this quarter, which will form the basis for future studies.
Silvana: Integration updates for muscle weight with initial exploration results expected in the back half of the year.
Silvana: Permitting milestones in both Mexico and Nevada.
Silvana: A resource update for the South Carlin complex as well as construction planning information for our South Railroad project.
Silvana: We continue to execute on our proven strategy to generate value to benefit to.
Silvana: To the benefit of all of our stakeholders.
Silvana: Thank you to our teams in the countries, where we operate now including our northern Canadian team.
Silvana: Whose commitment and delivery are driving this business forward.
Silvana: Here's a recent photo with the musselwhite team with one of the new scoops delivered immediately upon closing.
Speaker Change: And at this point I'd like to open the call to questions and pass it back to the operator.
Speaker Change: We will now begin the question and answer session. If you would like to ask a question simply press star followed by the number one on your telephone keypad again that is star one for any questions. We'll pause for just a moment to compile the Q&A roster.
Speaker Change: Our first question will come from the line of Andrew <unk> with BMO capital markets. Please go ahead.
Speaker Change: Okay. Thanks for taking us through the detail of the closing and the only adjustments in there.
Speaker Change: I did have a question about the cap.
Speaker Change: Sorry, the sustaining and non sustaining capex guided here for muscle like 90.
Speaker Change: $90 million $18 million.
Speaker Change: What portion of that.
Speaker Change: Is comparable to.
Speaker Change: Okay.
Speaker Change: To the 43 101 mine plan.
Speaker Change: Capital costs, they were published which I believe were.
Speaker Change: $57 million for 2025.
Speaker Change: Correct.
Speaker Change: Yeah. Thanks, Andrew I'll start and then certainly Andrew Cormier, Ken Ken can build on on my response.
Speaker Change: Context, I'd like to set is the technical report reflected reserves only minded out scenario.
Speaker Change: The guidance that we provided today.
Speaker Change: Includes increased investment above that technical report specifically in areas of lateral development.
And enhanced mobile fleet, the exploration, which we previously communicated as well as some transaction costs. So this really does represent an improvement to that.
Speaker Change: The reserve only technical report and investment over the next two years, we'll be making towards extending mine life and potentially expanding the production profile at that asset.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Anything further.
Speaker Change: Okay.
And.
Speaker Change: Sorry is that.
Speaker Change: Is that are there.
Andrew Bradbury: There are no comments from it Gen or is that it will work with maybe more pass it back to you Andrew if there are specifics in.
We want to get into please please ask the follow up question and otherwise we're happy to walk you through the breakdown between capital and expense amounts.
Andrew Bradbury: <unk> indicated in the material and presentation today.
Andrew Bradbury: Your availability.
Okay.
Andrew Bradbury: Okay.
I think thats it on the musselwhite.
Andrew Bradbury: Yes.
Andrew Bradbury: I think all set up there and if there's any follow up questions I will reach out. Thank you for letting me speak.
Sylvain Guerard: Perfect. Thanks, Andrew.
Sylvain Guerard: And once again for any questions Press star one on your telephone keypad.
Sylvain Guerard: Okay.
Speaker Change: Our next question will come from the line of Allison Carson with de Jordan. Please go ahead.
Allison Carson: Good morning, and thanks, so much for taking my questions today.
Speaker Change: I was wondering in terms of exploration, obviously mine life extension the priority at Musselwhite and I was wondering if we can expect sort of a similar size program next year or if that's what it is larger just startup to kick things off.
Allison Carson: Thanks Allison.
Allison Carson: Obviously, we're not providing guidance for next year, but the signal I can give is we should expect a similar sized exploration program next year, our exploration teams will need to use the information collected this year to define our program for next year, but holistically I can offer.
Allison Carson: The objective of the team is a 24 month objectives. So we have directed the team over the next 24 months to do sufficient drilling underground to extend mine life and sufficient drilling from surface to give us a.
Allison Carson: A broad understanding of the overall geologic complex. So that 24 month program can setup conversations in year three of our ownership.
Allison Carson: Not only with clarity on mine life extension, but then potential.
Allison Carson: Capital investment in expanding the operation So to answer your question quite directly at this point I would expect spending on exploration, Canada to be similar next year to this year, but clearly we'll need to let the results of this year defined the program next year.
Speaker Change: Great. Thanks, and then just one on <unk>. So I was wondering if you could give us sort of any color on what youre hearing about permitting in Mexico, it's been fairly quiet lately and have you heard about any new recent permits being given out and is there any concern that you don't see your permit come through this year.
Speaker Change: Yes, we don't have concerned because we are hearing things and thats based upon active conversations at both the state and federal level. So at a variety of levels of our organization, we are communicating with the regulators and bureaucrats in Mexico and everything indicates.
Speaker Change: That we should expect our permits on schedule just a reminder to all of the listeners and I know Youre aware Allison we submitted on November 11th of the last year and so our expectations on the schedule.
Speaker Change: Both.
Speaker Change: In the next couple of months, we should see here.
Speaker Change: A resolution on our application for expansion and all of the conversations at various levels would.
Speaker Change: Would indicate that we're on schedule to deliver that.
Speaker Change: That's great. Thank you so much for the color and Thats all for me today.
Speaker Change: Yes.
Speaker Change: And that will conclude our question and answer session I will now turn the call back over to Jason Simpson for any closing remarks.
Speaker Change: Sure.
Speaker Change: Since there are no further questions I would like to thank all of you for your time never hesitate to reach out to Orla should you have follow up questions.
Speaker Change: Yes.
Thank you.
Speaker Change: That will conclude today's call. Thank you all for joining you may now disconnect.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.