Orla Mining reports strong economics for Camino Rojo underground

Orla Mining (TSX: OLA) (NYSE: ORLA) said a preliminary economic assessment (PEA) shows an underground mine at its Camino Rojo property in Mexico would extend the operation’s projected life and generate a net present value (NPV) of $1.3 billion.

Building an underground operation below the existing Camino Rojo open pit would generate a 30% internal rate of return (IRR) at $3,100 per oz. gold over 17 years, Orla said late Thursday. If a $5,000 per oz. gold assumption were used, the NPV would jump to $3.3 billion and the IRR to 61%.

Initial capital required for this project is pegged at $608 million, while sustaining capital over the life of mine is estimated at $489 million.

“This strengthens Orla’s organic growth profile, and once in operation, will provide investors with additional free cash flow generation, highlighting leverage of Orla’s deep development portfolio,” BMO Capital Markets mining analyst Andrew Mikitchook wrote in a note Friday.

Orla shares jumped 5.9% to C$25.60 on Friday in Toronto, boosting the company’s market value to about C$9 billion ($6.4 billion).

Robust economics

Camino Rojo’s average annual gold production over the first 10 years is projected to be 215,000 oz., with an expected average all-in sustaining cost of $1,304 per payable oz. of gold. The underground mining operation would be supported by its own crushing, grinding and flotation circuits, producing saleable concentrates.

A phased de-risking program through 2026 will advance optimization studies, exploration decline development, and staged underground drilling to build technical and resource confidence ahead of a construction decision, Orla said.

The company added that it intends to complete a pre-feasibility study for the project in 2027.

Since 2020, approximately 110,000 metres of drilling have been completed at Camino Rojo, advancing it into a de-risked underground project with over 4 million gold equivalent oz. in measured and indicated mineral resources.

Exploration to date also helped to define higher-grade zones and extended the mineralization at depth with Zone 22, reinforcing the project’s district-scale potential.

“A multi-year program of drilling and test work underpins this initial underground expansion study, highlighting the potential opportunity beyond the current oxide heap leach operation,” Orla’s CEO Jason Simpson said in a news release.

“The work represents an important milestone as the project advances towards a future construction decision,” Simpson said. “Supported by a solid base case PEA and with the deposit remaining open in Zone 22, the project offers continued growth potential and the basis for a multi-decade mining complex in Mexico.”