Orla Mining Ltd. (NYSE: ORLA) Third Quarter 2022 Results Conference Call November 11, 2022 10:00 AMm. ET
Participating companies
Andrew Bradbury – Vice President of Investor Relations
Jason Simpson – President and Chief Executive Officer
Andrew Cormier – Chief Operating Officer
Étienne Morin – Chief Financial Officer
Conference Call Participants
Kulvir Gill – TD Securities
Operator
Good morning, gentlemen, and welcome to the Orla Mining convention call for the third quarter of 2022. My call is Rob and I will be your convention operator today. [Operator Instructions] Please note that this call is recorded.
Now I’d like to speak with Andrew Bradbury, Vice President of Investor Relations and Corporate Development at Orla Mining. Go on, Mr. Bradbury.
Andres Bradbury
Thank you, trader, and welcome to Orla’s third quarter 2022 earnings convention call about what we don’t forget today. During today’s call, we will make forward-looking statements that imply vital warnings related to those forward-looking statements. Unless otherwise stated, all dollar amounts discussed today will refer to U. S. dollars.
On the phone this morning, Orla’s control team, adding President and CEO Jason Simpson. Jason, it happens to you.
Jason Simpson
Today, as we deserve each and every day, let us not forget those who volunteered, sacrificed, served, fought and died for our freedom. Orla’s team will practice a minute of silence at 11 a. m. M. , Eastern Time. Orla is a combination of assets, groups and quality partners. And today, we’ll advise you through another solid quarter delivered through our team. First, the other people at Orla Mining stayed healthy for another quarter. That’s what I’m most proud of.
They continue to diligently oppose the COVID-19 virus and our new mine in Mexico has just exceeded 1 million hours without a lost time accident. Here are the other highlights of the third quarter. Operations at the Camino Rojo mine continued This start-up allowed us to increase our annual production target for 2022 by between 100,000 and 110,000 ounces. We also continue to manage pricing in this inflationary environment and the Camino Rojo mine continues to lead the industry in costs. Labor force strengthens money generation and our balance sheet.
This foundation will provide monetary flexibility as we move through our portfolio. During the quarter, we also completed the acquisition of Gold Standard Ventures. The owner of the South Railroad heap leaching allocation in the Carlin trend, as well as Lewis assets in the Battle Mountain trend. This acquisition diversifies and strengthens our portfolio. We are pleased to welcome the Gold Standard team and continue to advance in other generating mines.
I will now hand over to Andrew Cormier, our Chief Operating Officer, who will provide an operational update.
André Cormier
During the quarter, ongoing site operations continued to focus on optimizing mine, crushing, stacking and processing plant according to ongoing operations. Extraction rates have exceeded 2. 1 million tonnes of ore, with a pickling rate of 0. 91 and a gold grade of 0. 77 grams consistent per tonne, in line with the mine’s plan. We stacked 1. 8 million tons with an average full grade of 0. 88 consistent grams per ton, which equates to an average daily stacking rate of 19,200 consistent tons per day for the quarter, the consecutive quarter above the nominal capacity of 18,000 tons consistent with the day.
During the quarter, we produced only about 29,000 ounces of gold, bringing total gold production to date to just under 78,000 ounces. Due to strong gold production, the full-year forecast has been above 100,000 to 110,000 ounces of 90,000 to 100,000 ounces of gold. The tons of ore mined are in keeping with the block style and the recovery procedures to date are consistent with the steel recovery style. We continue to see the conversion of tons of waste-style blocks into ore on the upper banks of the pit.
I will now pass the call to Etienne Morin, Orla’s chief financial officer, to discuss the quarter’s monetary results.
Étienne Morin
During the quarter, we sold approximately 29,000 ounces at a learned net worth of $1,699 consistent with the ounce, generating $49 million in profit for the constant period. Our net income for the quarter was $8. 9 million or $0. 03 consistent with constant percentage after adjusting for the effect of unlearned foreign exchange earnings, adjusted earnings were $5. 7 million or $0. 02 consistent with constant percentage. It should be noted that during the quarter, in accordance with our accounting policy, we spent $8. 3 million on exploration and progression expenses as we continue to explore projects in Mexico, Panama and Nevada.
Cash charges for the quarter were $452 consistent with ounce sold, while total maintenance charges were $594 consistent with ounce sold, a transparent reminder of Camino Rojo’s lowest quartile charge structure. The money charge to date is $446 consistent with the ounce sold, while the all-inclusive maintenance charges are $597 consistent with the ounce sold. Red Road is immune to inflationary charge pressures observed globally and we have noticed increases in unit charges for several key reagents and consumables, which have been more than offset by less than expected rates, namely with electricity, diesel [indistinguishable].
Our capital expenditures totaled $1. 8 million in the third quarter, adding $800,000 in maintenance capital. The total forecast of maintenance charges for 2022 remains unchanged at $600 to $700 consistent with the ounce of gold sold. Capital was $15. 5 million for the quarter, impacted by reinvestments consistent with those discussed in the past in exploration and development. Meanwhile, loose money generation was $25. 2 million after adjusting for the effect of non-cash current capital, mainly source of income taxes and income earned from value-added tax refunds in Mexico. Due to strong money generation, our cash balance as of September 30 was approximately $89 million, while our net debt was $78 million.
It should be noted that since this is our first year of operations, we have accumulated approximately $24 million in income taxes and special mineral duties so far in 2022. And we expect another $10 million to $12 million in the fourth quarter. Starting in May next year, we plan to start paying the source of income taxes on a monthly basis.
And finally, as a reminder, in December we will make our first quarterly capital of our $5. 5 million credit line and we will also make our 3-letter similar to the Fresnillo bond moment for an amount of $15 million.
Now I’ll pass the call to Jason to talk about Red Road’s sulfides.
Jason Simpson
In September, we published the effects of the first five wells of the Phase 2 directional drilling program on the Red Road sulfides and continue to find higher-grade areas in apparent exploitable widths. This data has reshaped our attitude about opportunity. While drilling through the previously assigned homeowners was important, it was very well organized in favor of a giant open-pit mine scenario. And although open-pit mining is still the base case, under Orla’s leadership, we needed to perceive if there was any other imaginable technique. to raise the deposit.
To make this determination, we needed to be consistent with the idea of whether there was an upper grade zone in the larger mineralized envelope. Since 2020, we have been drilling directionally in the opposite direction to old drilling to better intersect major mineralized zones. . To date, all new sulphide drillings have improved the presence of a grade mineralization zone greater than 2 grams consistent with tonne at widths greater than 30 metres. This is an exciting progression as it offers the possibility of an underground mining scenario. Based on the promising effects seen in the Phase 1 and 2 programs, closer south-facing drilling will be required to fully capture the extent of potential underground resources.
The objective of these systems is the geological style and verify the continuity of the gold mineralization of higher grade, expanding the ounces that will be available for an underground resource. Therefore, we expect to supply major points in early 2023 in a Phase 3 south – Oriented drilling program and metallurgical test work. Once the directional and south-facing drilling test systems are completed, a PEA should be performed. This study will be based on the optimal progression approach for Orla. The publication of an EAP now does not take this into account, it does not take into account that this additional drilling would be premature. The other new concept we want percentage is the deep perspective we highlight on this slide. To date, the maximum drilling at Camino Rojo has focused on defining the deposit on the Caracol stratigraphic layer. However, ancient drilling has shown that high-grade mineralization is provided underneath.
During our Phase 2 fill drilling program, we drilled a few wells just beyond this Caracol formation and into deeper stratigraphic formations along the Dike and Breccia structures to trace those past intersections. We, these structures, are the main conduits of mineralization to the deposit. Our deeper wells, as well as ancient drilling, have intercepted significant mineralization, indicating that the formula is open in intensity along those structures in deeper stratigraphy, providing new insights for the deep extension of the Red Road sulfide deposit.
Future drilling systems will focus primarily on filling the Caracol with existing mineralization and resources, and some wells will also be deepened. Additional metallurgical testing will also be a component of Phase 3 drilling. In addition to the Phase 2 sulfide drilling program, we have also intensified exploration across the portfolio, which now includes South Railroad. Exploration spending by 2022 is now expected to total $18 million in Mexico, Panama and Nevada.
At Camino Rojo in Mexico, regional exploration paints include opposite-flow drilling and ongoing goal-setting activities. quarter. Precedence targets are expected to be drilled along mine orientation in the fourth quarter. In the third quarter, backfill drilling and expansion was also positioned at Caballito, our copper and gold discovery in Panama, which aimed to convert inferred resources to the indicated category and offering metallurgical testing apparatus. This drilling, as well as planned drilling at La Pava and Quemita, will continue through the fourth quarter.
In Nevada, drilling at Pinion SB in the southeast extension of the Pinion deposit was continued and completed and a new drilling program was initiated in late September in 3 mineralized zones with inferred resources, namely Jasperoid Wash, POD and Sweet Hollow, as well as at Dixie and expanding rust resources.
During the quarter, we finalized the acquisition and integration of Gold Standard Ventures, merging our groups and are proceeding with the authorization procedure for this rail assignment. generating mines in prospective jurisdictions with incredible geology. In many ways, South Railroad is for Red Road, a low-complexity heap leaching allocation with active economics on terrain with the best geological perspective.
The assignment is moving toward record resolution through the U. S. Bureau of Land Management. U. S. As the authorization procedure continues, we will explore opportunities to optimize allocation, adding gold recoveries. This can come simply by adding grinding to the circuit. Based in Camino Rojo, we know that with the addition of Cerro Quema oxides and Southern Railroad oxides, we can increase production by up to 300% in the medium term.
Beyond our oxide projects, we believe sulphide resources in Mexico, Panama and Nevada, as well as our prolific district onshore exploration packages, will supply the next level of production growth. We are moving at full speed on all fronts. We are pleased that the Camino Rojo mine continues to perform well in our first year of operation. Cash generation strengthens our balance sheet and supports our broad portfolio of exploration and progression opportunities.
We are pleased with the progress made so far and keep our heads down, focused on execution. This quarter, I want to thank the citizens of the local communities surrounding our operations. for many years to come.
At this point, I would like to open the question form and hand it to the operator.
Q&A session
Operator
[Operator Instructions] And we have one from the Kulvir Gill lineage of TD Securities.
Gill kulvir
I only have a quick inquiry about drilling Phase 3 and the upcoming AEP. Could you give us more information on how temporarily we expect this study to be published?And when do we expect drilling to be completed for Phase 3, Q3, Q4 next year?Or will it be driven again in 2024? Any concept would be helpful.
Jason Simpson
Yes. Thank you for the question. Therefore, we have not yet received approval for Phase 3 drilling. This will be done in a few weeks with the board of trustees, but the work plan was arranged and presented through Sylvain Guerard, who is on the call. I would be waiting for this drilling program – the drilling and the research and incorporation effects – to take the maximum of the year. At that point, we’ll find out where we are with well spacing in the high-grade portion of the reservoir. And if we have enough drilling spacing to an underground resource, we can move forward with AEP. If we don’t, we’re going to have to do more drilling for that. As it stands, I anticipate that we will complete Phase 3 drilling in 2023 and then we will be able to talk about our plans and timeline for clandestine ASP.
Operator
[Operator Instructions] It turns out we have no more questions. I will call Jason Simpson again to make some final remarks.
Jason Simpson
It is ok. Thank you, operator. Since there are no further questions, I must thank our team for their continued efforts in advancing our key projects and the good fortune we continue to provide. Please feel free to contact Orla if you have any follow-up questions. Thank you for your time.
Operator
That concludes the convening of today’s convention. Thank you for your participation. You can now log out.