40-F
Orla Mining Ltd. (ORLA)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 40-F
☐ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
or
☒ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31 , 2023
Commission File Number: 001-39766
ORLA MINING LTD.
(Exact name of Registrant as specified in its charter)
| Canada | **** | 1040 | **** | N/A |
|---|---|---|---|---|
| (Province or other jurisdiction of incorporation or organization) | | (Primary Standard Industrial Classification Code Number) | | (I.R.S. Employer Identification Number) |
Suite 1010, 1075 West Georgia Street Vancouver , British Columbia , V6E 3C9 , Canada
( 604 ) 564-1852
(Address and telephone number of Registrant’s principal executive offices)
C T Corporation System 28 Liberty Street
New York , New York **** 10005 ( 212 ) 894-8940
(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | **** | Trading Symbol(s) | **** | Name of each exchange on which registered |
|---|---|---|---|---|
| Common Shares, no par value | | ORLA | | NYSE American |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this Form: Annual information form Audited annual financial statements:
| ☒ Annual information form | ☒ Audited annual financial statements |
|---|
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 315,073,995
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒
YES
☐ NO Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
YES
☐ NO Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
EXPLANATORY NOTE
Orla Mining Ltd. (the “Company”) is a Canadian issuer eligible to file its annual report pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, or the portions thereof indicated below, that are filed as exhibits to this Annual Report, are incorporated herein by reference:
Annual Information Form
The Company’s Annual Information Form (“AIF”) is filed as Exhibit 99.1 to this Annual Report on Form 40-F (the “Annual Report”).
Management’s Discussion and Analysis
The Company’s management’s discussion and analysis for the year ended December 31, 2023 (“MD&A”) is filed as Exhibit 99.2 to this Annual Report.
Audited Annual Financial Statements
The Company’s audited financial statements as at and for the years ended December 31, 2023 and 2022 (the “Audited Financial Statements”) are filed as Exhibit 99.3 to this Annual Report.
FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Exchange Act, the Private Securities Litigation Reform Act of 1995 or in rules and releases made by the United States Securities and Exchange Commission (“SEC”), all as may be amended from time to time, as well as Canadian securities legislation and all other applicable securities legislation (referred to herein as “forward-looking statements”). Forward-looking statements are included to provide information about management’s current expectations and plans that allows investors and others to get a better understanding of the Company’s operating environment, the business operations and financial performance and condition.
Forward-looking statements include, but are not limited to, statements regarding: the estimation of mineral resources and mineral reserves; statements regarding planned exploration, development and mining activities and expenditures, including estimated rates of production, timing, all-in sustaining costs (“AISC”), cash costs, sustaining and operating costs, mine production plans, projected mining and process recovery rates, and proposed exploration plans and expected results and timing thereof; feasibility studies and economic results thereof, including future production, net present value, internal rate of return, costs, payback period, and expenses; mining dilution assumptions; timeline for receipt of any required agreements, approvals, or permits; closure costs and requirements; terms of and ability to reach a subsequent agreement with Fresnillo plc (“Fresnillo”) to access the sulphide mineral resource at the Camino Rojo Project (as defined in the AIF) and obtaining regulatory approvals related thereto; the Company’s ability to obtain required mine licences, mine permits, required agreements with third parties, and regulatory approvals required in connection with exploration plans and future mining and mineral processing operations, including necessary permitting required to implement expected future exploration plans; community and ejido relations; the expected price of gold and silver; the Company’s sustainability strategy and its short-term and long-term sustainability goals; the Company’s ability to remediate the material weaknesses in its internal controls over financial reporting; the Transaction with Contact (as such terms are defined in the AIF), including the receipt of necessary court, securityholder, and regulatory approvals, and the timing thereof; the Company’s ability to report on mineral reserve and mineral resource estimates for the Cerro Quema Project (as defined in the AIF) in future periods and the Company’s objectives and strategies. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, 1
“projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved (or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.
Forward-looking statements are based upon a number of factors and assumptions that, if untrue, could cause actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such statements. Forward-looking statements are based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material factors or assumptions used to develop forward-looking statements include, without limitation: the future price of gold and silver; anticipated costs and the Company’s ability to fund its programs; the Company’s ability to carry on exploration, development, and mining activities; tonnage of ore to be mined and processed; ore grades and recoveries; decommissioning and reclamation estimates; currency exchange rates remaining as estimated; prices for energy inputs, labour, materials, supplies and services remaining as estimated; the Company’s ability to secure and to meet obligations under property agreements, including the Layback Agreement (as defined in the AIF); that all conditions of the Company’s Revolving Facility (as defined in the AIF) will be met; the timing and results of drilling programs; mineral reserve and mineral resource estimates and the assumptions on which they are based; the discovery of mineral resources and mineral reserves on the Company’s mineral properties; the obtaining of a subsequent agreement with Fresnillo to access the sulphide mineral resource at the Camino Rojo Project and develop the entire Camino Rojo Project mineral resources estimate; that political and legal developments will be consistent with current expectations; the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction, and operation of projects; the timing of cash flows; the costs of operating and exploration expenditures; the Company’s ability to operate in a safe, efficient, and effective manner; the Company’s ability to obtain financing as and when required and on reasonable terms; the impact of coronavirus (“COVID-19”) on the Company’s operations; completion of the Transaction with Contact, including receipt of required securityholder, regulatory, and court approvals; that the Company’s activities will be in accordance with the Company’s public statements and stated goals; and that there will be no material adverse change or disruptions affecting the Company or its properties.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others: uncertainty and variations in the estimation of mineral resources and mineral reserves; the Company’s dependence on the Camino Rojo Oxide Mine (as defined in the AIF); risks related to the Company’s indebtedness; risks related to exploration, development, and operation activities; foreign country and political risks, including risks relating to foreign operations; risks related to the Cerro Quema Project; delays in obtaining or failure to obtain governmental permits, or non-compliance with permits; environmental and other regulatory requirements; delays in or failures to enter into a subsequent agreement with Fresnillo with respect to accessing certain additional portions of the mineral resource at the Camino Rojo Project and to obtain the necessary regulatory approvals related thereto; the mineral resource estimations for the Camino Rojo Project being only estimates and relying on certain assumptions; loss of, delays in, or failure to get access from surface rights owners; uncertainties related to title to mineral properties; water rights; risks related to natural disasters, terrorist acts, health crises, and other disruptions and dislocations, including the COVID-19 pandemic; financing risks and access to additional capital; risks related to guidance estimates and uncertainties inherent in the preparation of feasibility studies; uncertainty in estimates of production, capital, and operating costs and potential production and cost overruns; the fluctuating price of gold and silver; unknown labilities in connection with acquisitions; global financial conditions; uninsured risks; climate change risks; competition from other companies and individuals; conflicts of interest; risks related to compliance with anti-corruption laws; volatility in the market price of the Company’s securities; assessments by taxation authorities in multiple jurisdictions; foreign currency fluctuations; the Company’s limited operating history; litigation risks; the Company’s ability to identify, complete, and successfully integrate acquisitions; intervention by non-governmental organizations; outside contractor risks; risks related to historical data; the Company not having paid a dividend; risks related to the Company’s foreign subsidiaries; risks related to the Company’s accounting policies and internal controls; the Company’s ability to satisfy the requirements of SOX (as defined in the AIF); enforcement of civil liabilities; the Company’s status as a PFIC (as defined in the AIF) for U.S. federal income tax purposes; information and cyber security; the Company’s significant shareholders; gold industry concentration; shareholder activism; the failure to obtain securityholder, regulatory, or court approvals in connection with the Transaction with Contact; and other risks associated with executing the Company’s objectives and strategies. Although the Company believes its expectations are based upon reasonable assumptions and have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. See the section entitled “Risk Factors” in the AIF and the MD&A for additional risk factors that could cause results to differ materially from forward-looking statements. 2
Investors are cautioned not to put undue reliance on forward-looking statements. The forward-looking statements contained in this Annual Report and the documents incorporated by reference herein are made as of the date of such documents only and, accordingly, are subject to change after such date. The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions or factors, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. Investors are urged to read the Company’s subsequent filings, which can be viewed online under the Company’s profile on the System for Electronic Document Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca or the Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) at www.sec.gov.
DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING REQUIREMENTS
The Company is permitted, under a multijurisdictional disclosure system (“MJDS”) adopted by the United States, to prepare this Annual Report on Form 40-F in accordance with Canadian disclosure requirements, which are different from those of the United States. The Company is also subject to Canadian auditor independence standards, as well as certain U.S. federal securities laws and the applicable rules and regulations of the SEC and the Public Company Accounting Oversight Board (United States).
The Company prepares its financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and the audit is subject to Canadian auditing and auditor independence standards and may not be comparable to those prepared by companies in the United States. In addition, the Company is not required to prepare a reconciliation of its financial statements between IFRS and U.S. generally accepted accounting principles, and has not quantified such differences, which may be significant.
CURRENCY
Unless otherwise indicated, all dollar amounts in this Annual Report on Form 40-F are in United States dollars. The exchange rate of United States dollars into Canadian dollars, on December 31, 2023 based upon the daily average exchange rate as published by the Bank of Canada, was U.S.$1.00=CDN$1.3226. The exchange rate of United States dollars into Canadian dollars, on March 18, 2024 based upon the daily average exchange rate as published by the Bank of Canada, was U.S.$1.00=CDN$ 1.3541.
CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND RESERVE ESTIMATES
This Annual Report and the documents incorporated by reference herein and therein, have been prepared in accordance with Canadian standards for the reporting of mineral resource and mineral reserve estimates, which differ from the previous and current standards of the United States securities laws. In particular, and without limiting the generality of the foregoing, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “inferred mineral resources”, “indicated mineral resources”, “measured mineral resources” and “mineral resources” used or referenced in this Annual Report and the documents incorporated by reference herein and therein are Canadian mineral disclosure terms as defined in accordance with Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) – CIM Definition Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as amended (the “CIM Definition Standards”).
For United States reporting purposes, the SEC has adopted amendments to its disclosure rules (the “SEC Modernization Rules”) to modernize the mining property disclosure requirements for issuers whose securities are registered with the SEC under the Exchange Act. The SEC Modernization Rules more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards, including NI 43-101, and replace the historical property disclosure requirements for mining registrants that were included in Industry Guide 7 under the U.S. Securities Act. As a foreign private issuer that is eligible to file reports with the SEC pursuant to the MJDS, the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and provides disclosure under NI 43-101 and the CIM Definition Standards. Accordingly, mineral reserve and mineral resource information contained in this Annual Report and the documents incorporated by reference herein and therein, may not be comparable to similar information disclosed by United States companies.
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As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources.” In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding CIM Definition Standards that are required under NI 43-101. While the above terms are “substantially similar” to CIM Definition Standards, there are differences in the definitions under the SEC Modernization Rules and the CIM Definition Standards. There is no assurance any mineral reserves or mineral resources that the Company may report as “proven mineral reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules or under the prior standards of Industry Guide 7. Accordingly, information contained in this Annual Report and documents incorporated by reference herein and therein, may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure Controls and Procedures
At the end of the period covered by this Annual Report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) under the Exchange Act). Based on that evaluation, the CEO and the CFO have concluded that as of the end of the period covered by this Annual Report, the Company’s disclosure controls and procedures were not effective in ensuring that: (i) information required to be disclosed by the Company in reports that it files or submits to the SEC under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and (ii) material information required to be disclosed in the Company’s reports filed under the Exchange Act was accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate, to allow for accurate and timely decisions regarding required disclosure, as a result of the material weaknesses in internal controls over financial reporting as discussed below.
Management’s Annual Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in National Instrument 52-109 in Canada and in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s management, including its CEO and CFO, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
With the participation of the CEO and CFO, management conducted an evaluation of the design and operation of the Company’s internal control over financial reporting as of December 31, 2023, following the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 Framework). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded in its report that the Company’s internal control over financial reporting was not effective as of December 31, 2023 as a result of the material weaknesses in internal controls described below.
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A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected.
It was determined during management’s assessment that management’s review controls at the Company’s Mexican operating subsidiary were not designed or operating effectively as at December 31, 2023. Specifically, there was insufficient (i) documentation to evidence the performance of multiple key controls, (ii) operation of management review controls at a level of precision necessary to identity all potentially material errors, and (iii) verification of the completeness and accuracy of the data used in the performance of controls. The foregoing also impacted the information used in executing the Company’s corporate oversight controls, causing some of them to operate ineffectively as at December 31, 2023. The Company considers this a material weakness in its internal controls over financial reporting.
It was determined during management’s assessment that certain information technology general controls (“ITGCs”) were not designed or operating effectively as at December 31, 2023, in the areas of user access and change management over an IT system that supports the Company’s financial reporting process. This resulted in inadequate segregation of duties for its IT application controls. The automated and manual business process controls that are dependent on the affected ITGCs were also deemed to not be operating effectively as at December 31, 2023, because they had been impacted by the foregoing. The Company considers this a material weakness in its internal controls over financial reporting.
The above described material weaknesses impacted all of the significant classes of transactions of the Company.
To remediate these material weaknesses, the Company is instituting more detailed reviews and validation procedures for data used in financial reporting, with an emphasis on maintaining comprehensive documentation of these reviews. The Company is conducting extensive training sessions for mine personnel to underscore the importance of executing and evidencing their reviews to support the integrity of reported financial information. The Company is imposing additional restrictions on privileged access to its IT system, and will add and improve controls to enforce segregation of duties within its IT system. The Company is implementing additional change management systems, such as more extensive testing and formalized IT change authorizations. The Company is also implementing more controls to monitor, on an ongoing basis, changes and access to its IT system.
No material errors were identified in the consolidated annual financial statements as a result of the above-noted material weaknesses.
Attestation Report of the Independent Registered Public Accounting Firm
Ernst & Young LLP (“EY”), Chartered Professional Accountants, acted as the Company’s Independent Registered Public Accounting Firm for the financial year ended December 31, 2023. The attestation report of EY on management’s assessment of the Company’s internal control over financial reporting is included in the “Report of Independent Registered Public Accounting Firm” filed with the Audited Consolidated Financial Statements for the years ended December 31, 2023 and 2022, attached hereto as Exhibit 99.3, and is incorporated by reference herein.
Changes in Internal Control over Financial Reporting
During the period covered by this Annual Report, no changes occurred in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, other than the material weaknesses described above.
REGULATION BTR
The Company was not required by Rule 104 of Regulation Blackout Trading Restriction (“BTR”) to send any notice to its directors and executive officers during the fiscal year ended December 31, 2023 concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.
AUDIT COMMITTEE
Identification
The Company has a separately-designated standing audit committee (the “Audit Committee”) established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is comprised of three individuals: Elizabeth McGregor (Chair), David Stephens and Charles Jeannes. 5
Audit Committee Financial Experts
The Company’s Board of Directors (the “Board”) has determined that each of Elizabeth McGregor, David Stephens and Charles Jeannes is (i) an audit committee financial expert, under the applicable criteria prescribed by the SEC in the general instructions of Form 40-F and (ii) independent, under the applicable NYSE American listing standards and requirements.
The SEC has indicated that the designation of a person as an audit committee financial expert does not make such person an “expert” for any purpose, impose on such person any duties, obligations or liability that are greater than those imposed on such person as a member of the Audit Committee and Board in the absence of such designation, or affect the duties, obligations or liability of any other member of the Audit Committee or Board.
Audit Committee Charter
The Company’s Audit Committee charter is attached as a schedule to the AIF which is attached as Exhibit 99.1 to this Annual Report, available for review on the Company’s website at www.orlamining.com and available in print without charge to any shareholder that provides the Company with a written request addressed to the Company’s Corporate Secretary.
CODE OF ETHICS
The Company’s Board has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all directors, officers and employees of the Company. The Code addresses the items required to be included in a “code of ethics” as set forth in paragraph 9(b) of General Instruction B of Form 40-F, as well as various other topics.
During the year ended December 31, 2023, the Board approved certain amendments to the Code to reiterate the Company’s prohibition on engaging in anti-competitive practices and commitment to respecting human rights, as well as certain other housekeeping amendments. An amended copy of the Code is attached as Exhibit 99.6 to this Annual Report and is also available on SEDAR+ at www.sedarplus.ca and on the Company’s website at www.orlamining.com. The Company will provide a copy of the Code in print without charge to any person that provides the Company with a written request addressed to the Company’s Corporate Secretary.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EY (PCAOB ID No. 1263) acted as the Company’s Independent Registered Public Accounting Firm for the fiscal years ended December 31, 2023 and 2022. For a description of the total amount billed to the Company by EY for services performed in the last two financial years by category of service (audit fees, audit related fees, tax fees and all other fees), see “Audit Committee - External Auditor Service Fees” in the AIF, which is attached as Exhibit 99.1 to this Annual Report and incorporated by reference herein.
For a description of the Company’s pre-approval policies and procedures related to the provision of non-audit services, see “Audit Committee - Pre-Approval Policies and Procedures” in the AIF, which is attached as Exhibit 99.1 to this Annual Report and incorporated by reference herein.
All audit-related fees, tax fees, and all other fees for services provided by EY were approved by the Audit Committee in advance of the services being rendered.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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CONTRACTUAL OBLIGATIONS
The following table summarizes the Company’s contractual obligations, including payments due over the next five years and thereafter, as at December 31, 2023.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual obligations | **** | Payments due by period | |||||||||||||
| As at December 31, 2023 | | | | | Less than | | 1–3 | | 4–5 | | After | ||||
| (thousands of US dollars) | | Total | 1 year | years | years | 5 years | |||||||||
| Purchase commitments | | $ | 3,698 | | $ | 3,698 | | $ | — | | $ | — | | $ | — |
| Trade payables | | 8,219 | | 8,219 | | — | | — | | — | |||||
| Accrued liabilities | | 9,541 | | 9,541 | | — | | — | | — | |||||
| Lease commitments | | 3,143 | | 1,012 | | 1,210 | | 921 | | — | |||||
| Credit Facility and related interest | | 114,455 | | 7,185 | | 14,253 | | 93,017 | | — | |||||
| Total contractual obligations | | $ | 139,056 | | $ | 29,655 | | $ | 15,463 | | $ | 93,938 | | $ | — |
MINE SAFETY DISCLOSURE
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Review Administration under the Federal Mine Safety and Health Act of 1977.
During the fiscal year ended December 31, 2023, we were not subject to any citations, orders or other legal actions under the Federal Mine Safety and Health Act of 1977.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
CORPORATE GOVERNANCE
The Company’s corporate governance practices are consistent with all applicable current Canadian regulatory guidelines and standards. The Company is classified as a foreign private issuer in connection with its listing on the NYSE American and is not required to comply with most of the NYSE American’s corporate governance standards (the “NYSE Rules”) and instead may comply with Canadian corporate governance practices. However, the Company’s corporate governance practices incorporate many best practices derived from the NYSE Rules. The significant ways in which the Company’s corporate governance practices differ from those required of domestic companies under the NYSE Rules can be found on the Company’s website at www.orlamining.com. The Company reviews its governance practices and monitors developments in Canada and the United States on an ongoing basis to ensure it is in compliance with applicable rules and standards. The Board is committed to sound corporate governance practices which are both in the interest of its shareholders and contribute to effective and efficient decision making.
ADDITIONAL INFORMATION
Additional information relating to the Company, including the Audited Financial Statements, the MD&A and the AIF, can be found on SEDAR at www.sedar.com, on EDGAR at www.sec.gov or on the Company’s website at www.orlamining.com. Shareholders may also contact the Company’s Corporate Secretary by e-mail at info@orlamining.com to request copies of these documents and this Annual Report on Form 40-F for no charge.
UNDERTAKING
The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the SEC staff, and to furnish promptly, when requested to do so by the SEC staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
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CONSENT TO SERVICE OF PROCESS
The Company has previously filed with the SEC a written consent to service of process and power of attorney on Form F-X. Any change to the name or address of the Company’s agent for service shall be communicated promptly to the SEC by amendment to the Form F-X referencing the file number of the Company.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized.
| Date: March 19, 2024 | ORLA MINING LTD. | |
|---|---|---|
| By: | /s/Jason Simpson | |
| Jason Simpson | ||
| President and Chief Executive Officer |
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EXHIBIT INDEX
9
Exhibit 97
CLAWBACK POLICY
(the “ Policy ” )
OVERVIEW
The Board of Directors (“Board”) of Orla Mining Ltd. (the “Company”) has adopted this Policy in order to maintain a culture of focused, diligent and responsible management which discourages conduct detrimental to the growth of the Company and its subsidiary entities (“Subsidiaries”) and to ensure that incentive-based compensation (“Incentive-Based Compensation”) paid by the Company to Executive Officers (as defined below) is based upon accurate financial data and that erroneously awarded Incentive Based Compensation is recovered by the Company. This Policy is adopted pursuant to applicable rules, including the rules of the New York Stock Exchange American (the “NYSE American”) set forth in Listed Company Manual Section 811 -- Erroneously Awarded Compensation (the “NYSE American Rules”) and is designed to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified by Section 10D and Rule 10D-1 of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) and will be interpreted and applied accordingly.
This Policy applies in the event of an accounting restatement (“Restatement”) of the Company’s financial results as a result of material non-compliance with financial reporting requirements. A Restatement includes both (a) a correction of an error in previously issued financial statements that is material to the previously issued financial statements (often referred to as a “Big R” restatement); and (b) a correction of an error not material to the previously issued financial statements, but that would result in a material misstatement if the error was left uncorrected in the current period or the error correction was recognized in the current period (often referred to as a “little r” restatement), within the meaning of applicable securities laws, including Rule 10D-1 under the Exchange Act, or securities exchange rules or regulations on which the Company lists securities for trading, including NYSE American Section 811. This Policy does not apply in any situation where a Restatement is not as a result of material non-compliance with financial reporting requirements, such as, but not limited to, due to an out-of-period adjustment or due to a retrospective: (i) application of a change in accounting principles; (ii) revision to reportable segment information due to a change in the structure of the Company’s internal organization; (iii) reclassification due to a discontinued operation; (iv) application of a change in reporting entity, such as from a reorganization of entities under common control; (v) adjustment to provision amounts in connection with a prior business combination; and (vi) revision for stock splits, reverse stock splits, stock dividends, or other changes in capital structure.
The “executive officers” of the Company whose Incentive-Based Compensation is covered by this Policy are current and former executive officers who are, or were at any time, during an applicable Clawback Period, executive officers as defined in Rule 10D-1(d) of the Exchange Act as determined by the Board and at a minimum including all executive officers identified pursuant to Item 401(b) of Regulation S-K, and specifically including the Company’s Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer (as the principal financial officer), Vice President, Finance and Accounting (as principal accounting officer), any Vice-President of the Company in charge of a principal business unit, division or function, and any other officer or person who performs a significant policy-making function for the Company (the “Executive Officers”). Executive officers of Subsidiaries are deemed to be Executive Officers under this Policy if they perform policy making functions for the Company. All of these Executive Officers are subject to this Policy, even if an Executive Officer had no responsibility for the financial statement errors which required restatement. Each Executive Officer shall be required to sign and return to the Company the Acknowledgement Form attached hereto as Exhibit A pursuant to which such Covered Executive Officer will agree to be bound by the terms and comply with this Policy.
Incentive-Based Compensation includes any compensation, including cash and equity, which is granted, earned or vested based wholly or in part upon the attainment of any “financial reporting measure”. Financial reporting measures are those that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements and any measures derived wholly or in part from such financial information, including stock price and total shareholder returns (TSR). Incentive-Based Compensation is deemed “received” in the fiscal period during which the applicable financial reporting measure (as specified in the terms of the award) is attained, even if the payment or grant occurs after the end of that fiscal period. At the time of the award of Incentive-Based Compensation by the Company to any Executive Officer(s), the Company shall identify in writing to said Executive Officer(s), what, if any, portion of the Incentive Based Compensation awarded to the Executive Officer(s) is based upon the attainment of any financial reporting measure.
Incentive-Based Compensation does not include base annual salary, compensation which is awarded based purely on service to the Company (e.g. a time-vested award, including time-vesting stock options or restricted share rights) or compensation which is awarded solely at the discretion of the Board, nor does it include compensation which is awarded based on subjective standards, strategic measures (e.g. completion of a merger) or operational measures (e.g. attainment of a production target or certain market share).
TIME PERIOD COVERED BY POLICY
This Policy applies to any Incentive-Based Compensation received by an Executive Officer during any of the three (3) fiscal completed years immediately preceding the date the Company is required to restate its financial results (the “Clawback Period”), meaning the earlier of:
| (a) | the date that the Company’s Board (or a Board committee or authorized officer, if Board action is not required) concludes, or reasonably should have concluded, that the Company’s previously issued financial statements contain a material error; or |
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| (b) | the date on which a court, regulator or other similarly authorized body causes the Company to restate its financial information to correct a material error. |
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For purposes of clause (b) above, the date of the initial court order or other regulatory agency action would be the measurement date for the Clawback Period, but the application of this Policy would occur only after such order is final and non-appealable.
CALCULATION AND RECOVERY OF RECOVERABLE AMOUNT
The recoverable amount under this Policy is “the amount of Incentive-Based Compensation received by the Executive Officer or former Executive Officer that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the Restatement” (the “Recoverable Amount”) and which is received on or after October 2, 2023 (the “Effective Date”).
Applying this definition, after a Restatement, the Board will recalculate the applicable financial reporting measure and the amount of Incentive-Based Compensation based thereon for the applicable period(s). The Board will determine whether, based on that financial reporting measure as calculated relying on the original financial statements, an Executive Officer or former Executive Officer received a greater amount of Incentive-Based Compensation than would have been received applying the recalculated financial measure. Where Incentive-Based Compensation is based only in part on the achievement of a financial reporting measure performance goal, the Board will determine the portion of the original Incentive-Based Compensation based on or derived from the financial reporting measure which was restated and will recalculate the affected portion based on the financial reporting measure as restated to determine the difference between the greater amount based on the original financial statements and the lesser amount that would have been received based on the Restatement. If the Board cannot determine the Recoverable Amount directly from the information in the Restatement, then it will make its determination based on a reasonable estimate of the effect of the Restatement.
For Incentive-Based Compensation based on (or derived from) the Company’s stock price or total shareholder return and is not subject to mathematical recalculation directly from the Restatement, the amount to be recovered as erroneously awarded Incentive-Based Compensation shall be determined by the Board based on a reasonable
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estimate of the effect of the Restatement on the financial reporting measure upon which the erroneously awarded Incentive-Based Compensation was received. The Company shall maintain documentation of the determination of such reasonable estimate and provide the relevant documentation as required to the NYSE American.
The Recoverable Amounts will be calculated on a pre-tax basis to ensure that the Company recovers the full amount of Incentive-Based Compensation that was erroneously awarded.
If equity compensation is recoverable due to being granted to the Executive Officer (when the accounting results were the reason the equity compensation was granted) or vested by the Executive Officer (when the accounting results were the reason the equity compensation was vested), in each case in the Clawback Period, the Company will promptly recover the excess portion of the equity award that would not have been granted or vested based on the Restatement, as determined by the Board as it deems appropriate, in its sole and absolute discretion, to accomplish prompt recovery of the Recoverable Amount, and may include the following:
| (i) | if the equity award is still outstanding, the Executive Officer will forfeit the excess portion of the award; |
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| (ii) | if the equity award has been exercised or settled into shares (the “Underlying Shares”), and the Executive Officer still holds the Underlying Shares, the Company will recover the number of Underlying Shares relating to the excess portion of the award (less any exercise price paid for the Underlying Shares); and |
| --- | --- |
| (iii) | if the Underlying Shares have been sold by the Executive Officer, the Company will recover the proceeds received by the Executive Officer from the sale of the Underlying Shares relating to the excess portion of the award (less any exercise price paid for the Underlying Shares). |
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In addition, given that the Recoverable Amount must be calculated by the Company on a pre-tax basis and also include cash Incentive-Based Awards, the Board will determine, in its sole discretion, the timing and method or methods for recovering erroneously awarded Incentive-Based Compensation hereunder, which may also include, without limitation:
| (a) | requiring reimbursement of cash Incentive-Based Compensation previously paid; |
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| (b) | seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards; |
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| (c) | offsetting the recovery amount from any compensation otherwise owed by the Company to the Executive Officer (including, without limitation, any severance otherwise payable by the Company to the Executive Officer); |
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| (d) | making a deduction from the Executive Officer’s salary; |
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| (e) | requiring the Executive Officer to transfer back to the Company any shares such Executive Officer received pursuant to an equity award; |
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| (f) | cancelling, or reducing the number of shares subject to, or the value of, outstanding vested or unvested equity awards; and/or |
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| (g) | taking any other remedial and recovery action, as determined by the Board. |
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The Board will use commercially reasonable efforts to employ a method for recovery of erroneously awarded Incentive-Based Compensation that does not cause a violation of the payment timing rules of Section 409A of the United States Internal Revenue Code of 1986, as amended (the “Code”) or result in the Executive Officer being subject to the interest and additional tax provisions of Code Section 409A(a)(1)(B).
The Board will have no obligation to apply the same method of recoupment to each affected Executive Officer in connection with any Restatement.
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The Company is obliged to promptly recover erroneously awarded Incentive-Based Compensation from its Executive Officers, except under the following limited circumstances:
| (i) | if the Board determines that it would be impracticable to recover the excess compensation from an Executive Officer because the direct expense paid to a third party to assist in enforcing recovery would exceed the Recoverable Amount; or |
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| (ii) | recovery would likely cause an otherwise tax-qualified, broad-based retirement plan of the Company to fail to meet the requirements of Code Section 401(a)(13) or Code Section 411(a) and the regulations thereunder; or |
| --- | --- |
| (iii) | if the recovery of the Incentive-Based Compensation would violate the home country laws of the Company. |
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The Company shall maintain documentation of the determination of its attempts to recover erroneously awarded Incentive Based-Compensation and provide the relevant documentation as and when required by applicable regulatory authorities or securities exchanges including to the NYSE American.
NO ADDITIONAL PAYMENTS
In no event shall the Company be required to award Executive Officers an additional payment if the restated or accurate financial results would have resulted in a higher incentive compensation payment.
NO INDEMNIFICATION
The Company shall not be permitted to insure or to indemnify any Executive Officer against (i) the loss of any erroneously awarded Incentive-Based Compensation that is repaid, returned, or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation that is granted, paid, or awarded to an Executive Officer from the application of this Policy or that waives the Company’s right to recovery of any erroneously awarded Incentive-Based Compensation, and this Policy shall supersede any such agreement (whether entered into before, on or after the effective date of this Policy).
MANDATORY DISCLOSURES
The Company shall file this Policy as an exhibit to its Annual Report on Form 40-F and, if applicable, disclose information relating to the occurrence of an Restatement in accordance with applicable laws, rules and regulations, including, but not limited to, the Section 811 of the NYSE American Rules and Rule 10D-1 under the Exchange Act.
In the event the Company is required to clawback any erroneously awarded Incentive-Based Compensation from Executive Officers in accordance with the Section 811 of the NYSE American Rules and Rule 10D-1 under the Exchange Act, and the occurrence of such is disclosed by the Company in a public filing required by applicable law, the Company will disclose (i) the aggregate amount recovered, or (ii) if no amount was recovered, the absence of a recoverable amount.
AMENDMENT
This Policy may be amended by the Board from time to time. Changes to this Policy will be communicated to all persons to whom this Policy applies. However, no amendment or termination of this Policy shall be effective if such amendment or termination would cause the Company to violate any applicable laws, rules or regulations, including Canadian securities laws, SEC rules or the rules of any securities exchange on which the Company’s
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securities are listed for trading, including, without limitation, the Toronto Stock Exchange and NYSE American Rules.
GENERAL
The provisions of this Policy are intended to be applied to the fullest extent of the law; provided however, to the extent that any provisions of this Policy are found to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.
This Policy, as amended and approved on November 13, 2023, shall apply to all Incentive-Based Compensation that is granted, earned, or vested by Executive Officers on or after the Effective Date. Any Inventive-Based Compensation awards approved, awarded or granted before the Effective Date and on or after August 23, 2018, shall be governed by this Policy as adopted and approved by the Board on August 23, 2018.
This Policy is in addition to (and not in lieu of) any right of repayment, forfeiture or right of offset against any Executive Officer that is required pursuant to any statutory repayment requirement (regardless of whether implemented at any time prior to or following the adoption of this Policy). Nothing in this Policy in any way detracts from or limits any obligation that those subject to it have in law or pursuant to a management, employment, consulting or other agreement with the Company or any of its Subsidiaries.
This Policy shall be administered by the Board, or if so designated by the Board, the Human Resources and Compensation Committee, in which cases references herein to the Board shall be deemed to be references to the Human Resources and Compensation Committee. All determinations and decisions made by the Board pursuant to the provisions of this Policy shall be final, conclusive and binding on the Company, its Subsidiaries and the persons to whom this Policy applies. It is intended that this Policy be interpreted in a manner that is consistent with the requirements of Section 10D of the Exchange Act and any applicable rules adopted by the Securities and Exchange Commission, the Canadian Securities Administrators and any securities exchange on which the Company’s securities are listed.
OTHER RECOVERY RIGHTS
The Board intends that this Policy will be applied to the fullest extent of the law. The Board may require that any employment agreement, equity award agreement or similar agreement entered into on or after the Effective Date shall, as a condition to the grant of any benefit thereunder, require an Executive Officer to agree to abide by the terms of this Policy. Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery or recoupment that may be available to the Company pursuant to the terms of any other policy of the Company or any provision in any compensatory plan or arrangement, employment agreement, equity award agreement, or similar plan, agreement or arrangement, and any other legal rights and remedies available to the Company, or any actions that may be imposed by law enforcement agencies, regulators, administrative bodies, or other authorities. Further, the provisions of this Policy are in addition to (and not in lieu of) any rights to repayment the Company may have under Section 304 of the Sarbanes-Oxley Act of 2002.
SUCCESSORS
This Policy shall be binding and enforceable against all Executive Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.
CHANGE OF LISTING
In the event that the Company lists its securities on any national securities exchange or national securities association in the United States other than the NYSE American, all references to “NYSE American” in this Policy shall mean each national securities exchange or national securities association upon which the Company has a class of securities then listed.
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NOTICE AND ACKNOWLEDGEMENT
The Company will provide notice of this Policy to each Executive Officer and shall solicit from each Executive Officer on an annual basis a signed acknowledgment and agreement to this Policy in substantially the form attached hereto as Exhibit A. In addition, before the Company takes any action to seek recovery of erroneously awarded Incentive-Based Compensation pursuant to this Policy or any other action provided for in this Policy against an Executive Officer, the Company will provide notice of such clawback or other action. Notwithstanding anything to the contrary contained herein, the Company’s failure to provide notice to or receive acknowledgment from an Executive Officer will have no impact on the applicability or enforceability of this Policy against such Executive Officer.
If you have questions about the interpretation of this Policy, please contact the Chief Financial Officer of the Company.
ADOPTED AND APPROVED BY THE BOARD OF DIRECTORS OF ORLA MINING LTD. – AUGUST 23, 2018.
AMENDED AND APPROVED BY THE HUMAN RESOURCES AND COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS OF ORLA MINING LTD. – NOVEMBER 13, 2023 and applies to Incentive-Based Compensation that is granted, earned, or vested by Executive Officers on or after the Effective Date**.**
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EXHIBIT A
ACKNOWLEDGMENT AND AGREEMENT TO THE
CLAWBACK POLICY
I, the undersigned, acknowledge and agree that the Company has provided me with a copy of the Orla Mining Ltd. Clawback Policy (the “Policy”), and that I have had the opportunity to review the Policy. Capitalized terms used but not defined in this Acknowledgement and Agreement to the Policy (this “Acknowledgement”) shall have the meanings assigned to such terms in the Policy.
By signing below, I acknowledge and agree that I accept the provisions of the Policy and will abide by all of the terms of the Policy (as may be amended, restated, supplemented or otherwise modified from time to time) both during and after my employment with the Company, including, without limitation, by forfeiting, promptly repaying to the Company and/or offsetting, on a pre-tax basis, any erroneously awarded Incentive-Based Compensation that I may receive or have received.
I hereby agree to waive the assertion or application of any rights under federal, state, local or foreign law or in contract or equity that would otherwise conflict with or narrow the Company’s authority to interpret, apply and enforce the Policy to its fullest extent, including but not limited to, the Company’s authority to withhold or divert my wages pursuant to the Policy and/or any severance payments that I may be entitled after termination of my employment by the Company.
I further acknowledge and agree that all Incentive-Based Compensation granted, earned or vested on or after October 2, 2023 (the “Effective Date”) will be subject to the provisions of the Policy, and that agreement to the Policy is a condition to the receipt and retention of such compensation. I acknowledge and agree that my acceptance of the Policy is in consideration of Incentive-Based Compensation that is granted, earned or vested on or after the later of the Effective Date or the date of my signature below.
I further acknowledge and agree that notwithstanding any other provisions to the contrary in any of the agreements or arrangements set forth on Schedule A hereto, any Incentive-Based Compensation, including any annual incentive plan cash bonuses paid or payable to me in cash, any incentive equity awards issued under the Company’s Performance Share Unit Plan or any other equity incentive plan, agreement or arrangement with the Company, which is subject to recovery under any law, government rule or regulation, in effect from time to time, including specifically as required to implement Section 10D and Rule 10D-1 of the Exchange Act and any applicable rules or regulations promulgated thereunder and Section 811—Erroneously Awarded Compensation of the NYSE American Listed Company Manual (the “Clawback Rules”), will be subject to such deductions, offset, repayment, forfeiture, cancellation, clawback and recoupment as may be required to be made pursuant to the Policy and as set forth more fully in the Policy.
I acknowledge and agree that all existing agreements or arrangements between the Company and me set forth on Schedule A hereto shall be deemed amended and superseded by, and subject to, the terms and conditions of the Policy and the Clawback Rules from and after the Effective Date thereof. I further acknowledge and agree that notwithstanding any other agreement or arrangement to the contrary, I shall not be entitled to any indemnification or advancement of expenses with respect to the application or enforcement of the Policy and the Clawback Rules or any actions by the Company to enforce Policy and the Clawback Rules through deductions, offset, repayment, forfeiture, cancellation, clawback, recoupment or otherwise.
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| | Signature |
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Table of Contents Exhibit 99.1
ANNUAL INFORMATION FORM
For the Year Ended December 31, 2023
March 19, 2024
Table of Contents
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
TABLE OF CONTENTS
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| INTRODUCTORY NOTES AND CAUTIONARY STATEMENTS | 3 |
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| DESCRIPTION OF THE BUSINESS | 9 |
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| SUMMARY OF MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES | 18 |
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| MINERAL PROJECTS | 21 |
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| RISK FACTORS | 56 |
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| DESCRIPTION OF CAPITAL STRUCTURE | 76 |
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| DIVIDENDS | 77 |
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| MARKET FOR SECURITIES | 77 |
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| DIRECTORS AND OFFICERS | 80 |
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| LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 84 |
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| INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 84 |
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| TRANSFER AGENTS AND REGISTRARS | 85 |
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| MATERIAL CONTRACTS | 85 |
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| INTERESTS OF EXPERTS | 85 |
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| AUDIT COMMITTEE INFORMATION | 86 |
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| ADDITIONAL INFORMATION | 89 |
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| SCHEDULE “A” | 90 |
| Page 2<br><br> |
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Table of Contents
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
INTRODUCTORY NOTES AND CAUTIONARY STATEMENTS
GENERAL
In this Annual Information Form (“AIF”), Orla Mining Ltd., together with its subsidiaries, as the context requires, is referred to as the “Company” and “Orla”. Unless otherwise stated, all information contained in this AIF is as at December 31, 2023, being the last day of the Company’s most recently completed financial year.
This AIF should be read in conjunction with the Company’s audited consolidated financial statements and management’s discussion and analysis for the financial year ended December 31, 2023, which are available under the Company’s profile on the System for Electronic Document Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca and through the United States Securities and Exchange Commission’s (“SEC”) Electronic Data Gathering and Retrieval System (“EDGAR”) at www.sec.gov.
CURRENCY PRESENTATION AND EXCHANGE RATE INFORMATION
This AIF contains references to Canadian dollars (“C$”) and United States dollars (“$”, “US$”, or “US dollars”). All dollar amounts referenced, unless otherwise indicated, are expressed in United States dollars. Unless otherwise indicated, Canadian dollar amounts have been converted to United States dollars at the indicative exchange rate on December 31, 2023, as quoted by the Bank of Canada, of US$0.7561 = C$1.00.
GOLD PRICES
The high, low, average, and closing London PM fix gold (“gold” or “Au”) prices in United States dollars per troy ounce for each of the three years preceding the period ended December 31, 2023, as quoted by the London Bullion Market Association, were as follows:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | Year Ended December 31 | |||||||
| | | 2023 | **** | 2022 | **** | 2021 | |||
| High | | $ | 2,078 | | $ | 2,039 | | $ | 1,943 |
| Low | | $ | 1,811 | | $ | 1,629 | | $ | 1,684 |
| Average | | $ | 1,941 | | $ | 1,800 | | $ | 1,799 |
| Closing | | $ | 2,078 | | $ | 1,814 | | $ | 1,806 |
SILVER PRICES
The high, low, average, and closing London fix silver (“silver” or “Ag”) prices in United States dollars per troy ounce for each of the three years preceding the period ended December 31, 2023, as quoted by the London Bullion Market Association, were as follows:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | Year Ended December 31 | |||||||
| | | 2023 | **** | 2022 | **** | 2021 | |||
| High | | $ | 26.03 | | $ | 26.18 | | $ | 29.59 |
| Low | | $ | 20.09 | | $ | 17.77 | | $ | 21.53 |
| Average | | $ | 23.35 | | $ | 21.71 | | $ | 25.14 |
| Closing | | $ | 23.79 | | $ | 23.95 | | $ | 23.09 |
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Table of Contents
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|---|---|
| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This AIF contains “forward-looking statements” or “forward-looking information” within the meaning of applicable securities legislation (collectively, “forward-looking statements”). Forward-looking statements are included to provide information about management’s current expectations and plans that allows investors and others to get a better understanding of the Company’s operating environment, the business operations, and financial performance and condition.
Forward-looking statements include, but are not limited to, statements regarding: the estimation of Mineral Resources and Mineral Reserves (each as defined herein); statements regarding planned exploration, development and mining activities, and expenditures, including estimated rates of production, timing, all-in sustaining costs (“AISC”), cash costs, sustaining and operating costs, mine production plans, projected mining and process recovery rates, and proposed exploration plans and expected results and timing thereof; feasibility studies and economic results thereof, including future production, net present value, internal rate of return, costs, payback period, and expenses; mining dilution assumptions; timeline for receipt of any required agreements, approvals, or permits; closure costs and requirements; terms of and ability to reach a subsequent agreement with Fresnillo plc (“Fresnillo”) to access the sulphide Mineral Resource at the Camino Rojo Project (as defined below) and obtaining regulatory approvals related thereto; Orla’s ability to obtain required mine licences, mine permits, required agreements with third parties, and regulatory approvals required in connection with exploration plans and future mining and mineral processing operations, including necessary permitting required to implement expected future exploration plans; community and ejido relations; the expected price of gold and silver; the Company’s sustainability strategy and its short-term and long-term sustainability goals; the Transaction with Contact (as such terms are defined below), including the receipt of necessary court, securityholder, and regulatory approvals, and the timing thereof; the Company’s ability to report on Mineral Reserve and Mineral Resource estimates for the Cerro Quema Project (as defined below) in future periods; and the Company’s objectives and strategies. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible”, or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might”, or “will” be taken, occur or be achieved (or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.
Forward-looking statements are based upon a number of factors and assumptions that, if untrue, could cause actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such statements. Forward-looking statements are based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic, and competitive uncertainties and contingencies that may cause the Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material factors or assumptions used to develop forward-looking statements include, without limitation: the future price of gold and silver; anticipated costs and the Company’s ability to fund its programs; the Company’s ability to carry on exploration, development, and mining activities; tonnage of ore to be mined and processed; ore grades and recoveries; decommissioning and reclamation estimates; currency exchange rates remaining as estimated; prices for energy inputs, labour, materials, supplies and services remaining as estimated; the Company’s ability to secure and to meet obligations under property agreements, including the Layback Agreement (as defined below); that all conditions of the Revolving Facility (as defined below) will be met; the timing and results of drilling programs; Mineral Reserve and Mineral Resource estimates and the assumptions on which they are based; the discovery of Mineral Resources and Mineral Reserves on the Company’s mineral properties; the obtaining of a subsequent agreement with Fresnillo to access the sulphide Mineral Resource at the Camino Rojo Project and develop the entire Camino Rojo Project Mineral Resources estimate; that political and legal developments will be consistent with current expectations; the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction, and operation of projects; the timing of cash flows; the costs of operating and exploration expenditures; the Company’s ability to operate in a safe, efficient, and effective manner; the Company’s ability to obtain financing as and when required and on reasonable terms; the impact of coronavirus (“COVID-19”) on the Company’s operations; completion of the Transaction with Contact, including receipt of required securityholder,
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Table of Contents
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
regulatory, and court approvals; that the Company’s activities will be in accordance with the Company’s public statements and stated goals; and that there will be no material adverse change or disruptions affecting the Company or its properties.
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that could cause actual events or results to differ from those expressed or implied. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Certain important factors that could cause actual results, performance, or achievements to differ materially from those in the forward-looking statements include, among others: uncertainty and variations in the estimation of Mineral Resources and Mineral Reserves; the Company’s dependence on the Camino Rojo Oxide Mine (as defined below); risks related to the Company’s indebtedness; risks related to exploration, development, and operation activities; foreign country and political risks, including risks relating to foreign operations; risks related to the Cerro Quema Project; delays in obtaining or failure to obtain governmental permits, or non-compliance with permits; environmental and other regulatory requirements; delays in or failures to enter into a subsequent agreement with Fresnillo with respect to accessing certain additional portions of the Mineral Resource at the Camino Rojo Project and to obtain the necessary regulatory approvals related thereto; the Mineral Resource estimations for the Camino Rojo Project being only estimates and relying on certain assumptions; loss of, delays in, or failure to get access from surface rights owners; uncertainties related to title to mineral properties; water rights; risks related to natural disasters, terrorist acts, health crises, and other disruptions and dislocations, including the COVID-19 pandemic; financing risks and access to additional capital; risks related to guidance estimates and uncertainties inherent in the preparation of feasibility studies; uncertainty in estimates of production, capital, and operating costs and potential production and cost overruns; the fluctuating price of gold and silver; unknown labilities in connection with acquisitions; global financial conditions; uninsured risks; climate change risks; competition from other companies and individuals; conflicts of interest; risks related to compliance with anti-corruption laws; volatility in the market price of the Company’s securities; assessments by taxation authorities in multiple jurisdictions; foreign currency fluctuations; the Company’s limited operating history; litigation risks; the Company’s ability to identify, complete, and successfully integrate acquisitions; intervention by non-governmental organizations; outside contractor risks; risks related to historical data; the Company not having paid a dividend; risks related to the Company’s foreign subsidiaries; risks related to the Company’s accounting policies and internal controls; the Company’s ability to satisfy the requirements of SOX (as defined below); enforcement of civil liabilities; the Company’s status as a PFIC (as defined below) for U.S. federal income tax purposes; information and cyber security; the Company’s significant shareholders; gold industry concentration; shareholder activism; the failure to obtain securityholder, regulatory, or court approvals in connection with the Transaction with Contact; and other risks associated with executing the Company’s objectives and strategies.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Although the Company believes its expectations are based upon reasonable assumptions and have attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events, or results not to be as anticipated, estimated, or intended. See the section entitled “Risk Factors” below for additional risk factors that could cause results to differ materially from forward-looking statements.
Investors are cautioned not to put undue reliance on forward-looking statements. The forward-looking statements contained herein are made as of the date of this AIF and, accordingly, are subject to change after such date. The Company does not intend, and does not assume any obligation, to update this forward-looking information, except as required by law. Investors are urged to read the Company’s filings with Canadian securities regulatory agencies, which can be viewed online under the Company’s profile on SEDAR+ at www.sedarplus.ca and the Company’s documents filed with, or furnished to, the SEC, which are available on EDGAR at www.sec.gov.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
As set forth under “Risk Factors” herein, investors are cautioned that all of the mineralization comprising the Company’s Mineral Resource estimate with respect to the Camino Rojo Project is contained on mineral titles controlled by the Company. However, the Mineral Resource estimate assumes that the north wall of the conceptual floating pit cone used to demonstrate reasonable prospects for eventual economic extraction extends onto lands where mineral title is held by Fresnillo and that waste would be mined on Fresnillo’s mineral titles. On December 21, 2020, Orla announced that it had entered into the Layback Agreement. The Layback Agreement allows Orla to expand the Camino Rojo Project oxide pit onto part of Fresnillo’s mineral concession located immediately north of Orla’s property. This expansion will increase oxide and transitional ore available for extraction on Orla’s property below the pit outlined in Orla’s previous 2019 Feasibility Study as set forth in the technical report titled “Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project, Municipality of Mazapil, Zacatecas, Mexico” dated June 25, 2019 (the “2019 Camino Rojo Report”). The Layback Agreement is only with respect to the portion of the heap leach material included in the current Mineral Reserve. As such, any potential development of the Camino Rojo Project that includes an open pit encompassing the entire Mineral Resource estimate would be dependent on an additional agreement with Fresnillo (or any potential subsequent owner of the mineral titles). It is estimated that approximately two-thirds of the mill Mineral Resource estimate and one-quarter of the leach Mineral Resource estimate comprising the Mineral Resource estimate are dependent on this additional agreement being entered into with Fresnillo. The leach Mineral Resource dependent on the additional agreement is mainly comprised of less oxidized transitional material with the lowest predicted heap-leach recoveries. Delays in, or failure to obtain, an additional agreement with Fresnillo would affect the development of a significant portion of the Mineral Resources of the Camino Rojo Project that are not included in the 2021 Camino Rojo Report (as defined below) mine plan, in particular by limiting access to significant mineralized material at depth. There can be no assurance that the Company will be able to negotiate such additional agreement on terms that are satisfactory to the Company and Fresnillo or that there will not be delays in obtaining the necessary additional agreement. Should such a subsequent agreement with Fresnillo not be obtained on favourable terms, the economics of any potential mine development using the full Mineral Resource estimate would be significantly negatively impacted.
SCIENTIFIC AND TECHNICAL INFORMATION
Unless otherwise indicated, scientific and technical information in this AIF relating to the Company’s mineral properties has been reviewed and approved by J. Andrew Cormier, P.Eng., Chief Operating Officer of the Company, and Sylvain Guerard, P. Geo., Senior Vice President, Exploration of the Company. Mr. Cormier and Mr. Guerard are each a “Qualified Person” as defined under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).
The disclosure included in this AIF uses Mineral Reserves and Mineral Resources classification terms that comply with reporting standards in Canada and the Mineral Reserves and Mineral Resources estimations are made in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards on Mineral Reserves and Mineral Resources adopted by the CIM Council on May 10, 2014 (the “CIM Standards”) and NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. The following definitions are reproduced from the CIM Standards:
A “Mineral Resource” is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated, or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
An “Inferred Mineral Resource” is that part of a Mineral Resource for which quantity and grade or quality are estimated based on limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that most of the Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
An “Indicated Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.
A “Measured Mineral Resource” is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.
A “Mineral Reserve” is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The reference point at which Mineral Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported. Mineral Reserves are sub-divided in order of increasing confidence into Probable Mineral Reserves and Proven Mineral Reserves. The public disclosure of a Mineral Reserve must be demonstrated by a Pre-Feasibility Study or Feasibility Study.
A “Probable Mineral Reserve” is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. Probable Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.
A “Proven Mineral Reserve” is the economically mineable part of a Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence in the Modifying Factors. Proven Mineral Reserve estimates must be demonstrated to be economic, at the time of reporting, by at least a Pre-Feasibility Study.
“Modifying Factors” are considerations used to convert Mineral Resources to Mineral Reserves. These include, but are not restricted to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social, and governmental factors.
CAUTIONARY NOTE TO UNITED STATES INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED, AND INFERRED MINERAL RESOURCES
This AIF has been prepared in accordance with Canadian standards for the reporting of Mineral Resource and Mineral Reserve estimates, which differ from the previous and current standards of the United States securities laws. In particular, and without limiting the generality of the foregoing, the terms “Mineral Reserve”, “Proven Mineral Reserve”, “Probable Mineral Reserve”, “Inferred Mineral Resources”, “Indicated Mineral Resources”, “Measured Mineral Resources”, and “Mineral Resources” used or referenced in this AIF are Canadian mineral disclosure terms as defined in accordance with NI 43-101 and the CIM Standards.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
For United States reporting purposes, the SEC has adopted amendments to its disclosure rules (the “SEC Modernization Rules”) to modernize the mining property disclosure requirements for issuers whose securities are registered with the SEC under the Securities Exchange Act of 1934, as amended. The SEC Modernization Rules more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards, including NI 43-101, and replace the historical property disclosure requirements for mining registrants that were included in Industry Guide 7 under the Securities Act of 1933, as amended (the “US Securities Act”). As a foreign private issuer that is eligible to file reports with the SEC pursuant to the multi-jurisdictional disclosure system, the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and provides disclosure under NI 43-101 and the CIM Standards. Accordingly, Mineral Reserve and Mineral Resource information contained in this AIF may not be comparable to similar information disclosed by United States companies.
As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “Measured Mineral Resources”, “Indicated Mineral Resources”, and “Inferred Mineral Resources.” In addition, the SEC has amended its definitions of “Proven Mineral Reserves” and “Probable Mineral Reserves” to be “substantially similar” to the corresponding CIM Standards that are required under NI 43-101. While the above terms are “substantially similar” to CIM Standards, there are differences in the definitions under the SEC Modernization Rules and the CIM Standards. There is no assurance any Mineral Reserves or Mineral Resources that the Company may report as “Proven Mineral Reserves”, “Probable Mineral Reserves”, “Measured Mineral Resources”, “Indicated Mineral Resources”, and “Inferred Mineral Resources” under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules or under the prior standards of Industry Guide 7. Accordingly, information contained in this AIF may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
NON-GAAP MEASURES
This AIF includes certain performance measures (“non-GAAP measures”) which are not specified, defined, or determined under generally accepted accounting principles (in the Company’s case, International Financial Reporting Standards, or “IFRS”), namely AISC and cash costs per ounce. These are common performance measures in the gold mining industry, but because they do not have any mandated standardized definitions, they may not be comparable to similar measures presented by other issuers. Accordingly, the Company uses such measures to provide additional information and readers should not consider them in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles.
Please see the information under the heading “Non-GAAP Measures” in the Company’s management’s discussion and analysis for the financial year ended December 31, 2023, which section is incorporated by reference in this AIF, for a description of the non-GAAP measures noted above. The Company’s management’s discussion and analysis may be found on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
DESCRIPTION OF THE BUSINESS
OVERVIEW
Orla is a Canadian company listed on the Toronto Stock Exchange (“TSX”) under the symbol “OLA” and on the NYSE American LLC (the “NYSE American”) under the symbol “ORLA”. Orla’s corporate strategy is to acquire, explore, develop, and operate mineral properties where its expertise can substantially increase stakeholder value. Orla has two material gold projects for the purposes of NI 43-101:
| ● | the Camino Rojo project (“Camino Rojo” or the “Camino Rojo Project”) located in Zacatecas, Mexico, which consists of the Camino Rojo oxide gold mine (the “Camino Rojo Oxide Mine”), which achieved commercial production effective April 1, 2022, and the Camino Rojo sulphides project (the “Camino Rojo Sulphides”), and |
|---|---|
| ● | the South Railroad project (“South Railroad” or the “South Railroad Project”) located in Nevada, which consists of the Dark Star and Pinion deposits and is situated within a prospective land package along the Carlin trend. |
| --- | --- |
For further details regarding the Camino Rojo Project and the South Railroad Project, including information regarding their associated NI 43-101 technical reports, see “Summary of Mineral Reserve and Mineral Resource Estimates” and “Mineral Projects”.
NAME, ADDRESS AND INCORPORATION
The Company was incorporated under the Business Corporations Act (Alberta) on May 31, 2007 as a Capital Pool Company (as defined by the TSX Venture Exchange). On June 3, 2010, the Company was continued into British Columbia under the Business Corporations Act (British Columbia) and on April 21, 2015, the Company was continued into Ontario under the Business Corporations Act (Ontario). On June 12, 2015, the Company changed its name from “Red Mile Minerals Corp.” to “Orla Mining Ltd.” On December 2, 2016, in order to facilitate the acquisition of Pershimco Resources Inc. (“Pershimco”), the Company was continued as a federal company under the Canada Business Corporations Act (the “CBCA”). Following the continuance, on December 6, 2016, the plan of arrangement under the CBCA involving Orla and Pershimco was affected. Pursuant to the plan of arrangement, among other things, Orla and Pershimco were amalgamated and continued as one company under the name “Orla Mining Ltd.”
The Company’s registered office and its head and principal office is located at Suite 1010 – 1075 West Georgia Street, Vancouver, British Columbia, Canada, V6E 3C9.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
INTERCORPORATE RELATIONSHIPS
The following is a diagram of the intercorporate relationships among Orla and its subsidiaries, including their respective jurisdictions of incorporation.
Certain inactive subsidiaries with both less than 10% of the total assets of the Company and 10% of the total revenues of the Company are excluded from the diagram. The Company holds 100% of the shares of each subsidiary, provided that, as required under Mexican corporate law, Minera Camino Rojo SA de CV (“Minera Camino Rojo”) has two shareholders – Orla Mining Ltd. holds 98% of the shares and 2% are held by a Canadian subsidiary of the Company, which holds its shares in trust for the Company.
THREE YEAR HISTORY
Developments During 2021
On January 11, 2021, the Company announced the results of an updated Feasibility Study and Mineral Reserve estimate on the Camino Rojo Project. On February 9, 2021, the Company filed the associated technical report for the Feasibility Study titled “Unconstrained Feasibility Study NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” dated effective January 11, 2021 (the “2021 Camino Rojo Report”) on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov. The 2021 Camino Rojo Report superseded the 2019 Camino Rojo Report. See “Mineral Projects – Camino Rojo Project”.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
On February 26, 2021, the Company announced that it had closed the layback agreement (the “Layback Agreement”) with Fresnillo following receipt of approval from the Mexican Federal Competition Commission (Comisión Federal de Competencia Económica). The Layback Agreement, originally announced by the Company on December 21, 2020, allows the Company to expand the Camino Rojo Project Oxide Mine onto part of Fresnillo’s mineral concession located immediately north of the Company’s property. This provided the Company with access to oxide and transitional heap leachable Mineral Resources on the Company’s property below the open pit outlined in the 2019 Camino Rojo Report, subject to receipt of required permits. In addition, the Layback Agreement provides Orla with the right to mine from Fresnillo’s mineral concession, and recover for Orla’s account, all oxide and transitional material amenable to heap leaching that is within an expanded open pit. Pursuant to the terms of the Layback Agreement, the Company was required to pay total cash consideration of $62.8 million through a staged payment schedule, with remaining payments bearing interest at 5% per annum until the date of payment. The final payment under the Layback Agreement were made by the Company in November 2023.
On June 30, 2021, the Company announced a $35.0 million non-brokered prospectus financing consisting of 9,085,263 Common Shares priced at C$4.75 per Common Share for total gross proceeds of $35,000,000 (C$43,155,000). The financing was subscribed to by accredited investors, including Pierre Lassonde, Agnico Eagle Mines Limited (“Agnico Eagle”), Trinity Capital Partners Corporation, and a large institutional investor. The financing was completed on July 14, 2021.
On December 13, 2021, the Company completed the first gold pour at the Camino Rojo Oxide Mine.
Developments During 2022
On March 1, 2022, the Company appointed Chafika Eddine as Chief Sustainability Officer, a newly created position within the Company.
The Company declared commercial production at the Camino Rojo Oxide Mine effective April 1, 2022.
On April 28, 2022, the Company entered into a credit agreement (the “Original Credit Agreement”) in respect of a US$150 million secured credit facility, which consisted of a US$100 million term facility and a US$50 million revolving facility, through a syndicate of lenders composed of The Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce.
On June 12, 2022, Orla entered into a definitive arrangement agreement with Gold Standard Ventures Corp. (“Gold Standard”) pursuant to which Orla agreed to acquire all of the issued and outstanding shares of Gold Standard by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia) (the “BCBCA”). Under the terms of the transaction, Gold Standard shareholders received, in exchange for each Gold Standard common share held, 0.1193 of a Common Share and C$0.0001 in cash. The transaction closed on August 12, 2022, resulting in total cash consideration paid of $28,700 and the issuance of 43,688,556 Common Shares to Gold Standard shareholders. Gold Standard’s key asset was the South Railroad Project, a feasibility-stage, open pit, heap leach project located on the Carlin trend in Nevada. As part of the transaction, Orla also acquired the Lewis Project, a strategically located, prospective land package on the Battle Mountain trend in Nevada. See “Mineral Projects – South Railroad Project” and “Mineral Projects – Other Projects – Lewis Project” below for additional information.
On June 23, 2022, the Company held its 2022 annual general meeting. At the meeting, Tamara Brown and Scott Langley were elected as directors of the Company, with Mr. Langley replacing Eric Colby as Newmont Corporation’s (“Newmont”) nominee under the investor rights agreement between Newmont and the Company. George Albino and Ritch Hall did not stand for re-election and, accordingly, their term in office as Directors of the Company expired at the close of the annual general meeting.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Developments During 2023
On April 13, 2023, the Company filed a short form base shelf prospectus (the “2023 Base Shelf Prospectus”) with the securities regulatory authorities in each of the provinces and territories of Canada, which allows the Company to offer for sale and issue from time to time Common Shares, warrants to purchase Common Shares, subscription receipts, units and debt securities, or any combination thereof (collectively, the “Securities”) during the 25-month period that the 2023 Base Shelf Prospectus, including any amendments thereto, remains effective. The 2023 Base Shelf Prospectus was part of a registration statement on Form F-10 which the Company also filed with the SEC under the U.S. Securities Act relating to the Securities. The Company’s previous base shelf prospectus was set to expire in April of 2023. The renewed 2023 Base Shelf Prospectus is effective for a further 25-month period and also qualifies for distribution in the United States.
On June 21, 2023, the Company held its 2023 annual general meeting. At the meeting, Ms. Ana Sofía Ríos was elected as a director of the Company.
On August 21, 2023, the Company released its inaugural Sustainability Report, which highlighted the Company’s approach and performance on its environmental, social, and governance (“ESG”) initiatives. See “Description of the Business – Environmental, Social and Governance” below for additional information.
On August 28, 2023, the Company amended and restated the Original Credit Agreement (the “Amended Credit Agreement”) in respect of an amended credit facility through its existing syndicate of lenders comprised of The Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce. The amended facility consists of a US$150 million revolving term facility (the “Revolving Facility”), with the ability to increase the facility to US$200 million, subject to receipt of additional binding commitments and satisfaction of certain conditions precedent. The Revolving Facility has a four-year term, with full payment due upon maturity. The applicable interest rate for the Revolving Facility is based on the term Secured Overnight Financing Rate (SOFR), plus an applicable margin ranging from 2.50% to 3.75% based on the Company’s leverage ratio at the end of each fiscal quarter. A standby fee is payable on the undrawn portion of the facility. As of the date of this AIF, the Company has $88.35 million drawn under the Revolving Facility.
The Company appointed Mr. Rob Krcmarov to its Board of Directors on November 20, 2023.
On December 15, 2023, the Panamanian Ministry of Commerce and Industry (“MICI”) rejected the Company’s requests for extension for the three mining concessions comprising the Company’s Cerro Quema gold project (the “Cerro Quema Project”), declared the concessions cancelled and declared the area comprising the concessions to be a reserve area. On December 26, 2023, Minera Cerro Quema, S.A. (“MCQSA”), the Company’s subsidiary that holds the Cerro Quema Project, filed requests for reconsideration of MICI’s decisions. On March 11, 2024, MICI rejected the requests for reconsideration. The Company, both for itself and MCQSA, intends to pursue its rights under the Canada-Panama Free Trade Agreement (the “FTA”). See “Mineral Properties – Other Properties – Cerro Quema Project” and “Risk Factors –The Cerro Quema Project” for additional information.
Developments During 2024
On February 25, 2024, Orla entered into a definitive arrangement agreement with Contact Gold Corp. (“Contact”) pursuant to which the Company has agreed to acquire all of the issued and outstanding common shares of Contact (the “Contact Shares”) pursuant to a court-approved plan of arrangement under the BCBCA. Under the terms of the proposed transaction (the “Transaction”), Contact shareholders will receive, in exchange for each Contact Share held, 0.0063 of a Common Share. Contact’s key asset is the 100%-owned Pony Creek property, a 4,500 hectare exploration land package, strategically located adjacent to the South Railroad Project in the Carlin trend in Nevada. The Transaction is subject to securityholder, stock exchange, and court approval, along with the satisfaction of certain other closing conditions customary in a transaction of this nature. The Transaction is expected to close in late April 2024.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG)
OVERVIEW
Orla’s commitment to ESG practices is critical to adding value to its business by allowing Orla to attract and retain top talent, earn the trust of key stakeholders, effectively manage risk, and ensure Orla’s long-term competitiveness and sustainability.
Orla is committed to conducting business in a responsible manner at all times, which means respecting the health and safety of its employees, protecting the environment, respecting the human rights of employees and the residents in the communities in which the Company operates, and contributing to the sustainable development of those communities. Orla believes that it is its responsibility to transform Mineral Resources into a net positive benefit for its stakeholders.
Orla has been focused on strengthening its ESG approach through aligning Company practices to industry leading standards and adopting a more robust reporting and sustainability disclosure.
Orla has also conducted an ESG Materiality Assessment, which focused on identifying and prioritizing the ESG factors with the greatest potential to impact the value of the business. The ESG Materiality Assessment considered leading ESG frameworks and standards (including the Sustainability Accounting Standards Board and the recommendations of the Task Force on Climate-related Financial Disclosures) as well as relevant ESG regulations and initiatives. The ESG Materiality Assessment is reviewed and updated annually.
In 2023, Orla also released its inaugural Sustainability Report, highlighting the Company’s approach and performance on ESG initiatives. The Sustainability Report enhances Orla’s ESG disclosure and introduces a long-term roadmap through the Company’s “Towards 2030 Sustainability Strategy”. This strategy sets clear priorities, key performance indicators, action plans and timelines to drive progress in areas such as health and safety, climate change mitigation, water stewardship, biodiversity, community impact management, workforce diversity, equity, and inclusion. The Sustainability Report also outlined the Company’s key sustainability performance highlights for 2022, notably:
| ● | 25% of Orla’s corporate goals were linked to ESG objectives, all of which were successfully met. |
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| ● | ESG performance evaluations were conducted for all executives and managerial-level employees. |
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| ● | A strong safety record was achieved, with a lost time injury frequency rate of 1.49 across various sites in 2022. |
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| ● | Significant community contributions being made at Camino Rojo, including local employment, local procurement, land leases, and local infrastructure investments. |
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| ● | The Company’s achievements in reducing air emissions and water use. |
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The full text of the Sustainability Report can be found on Orla’s website at www.orlamining.com/about-us/environmental-social-and-governance-esg.
The following sections provide an overview of certain aspects of Orla’s approach to ESG.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ESH&S COMMITTEE AND POLICIES
The Board has established an Environmental, Sustainability, Health & Safety Committee which is responsible for all ESG matters particularly as they apply to environmental, sustainability, health, and safety concerns, assessing environmental and social risks and the Company’s risk management thereof. Orla has also adopted a number of policies in support of its sustainability goals, as further discussed below. The full text of these policies can be found on Orla’s website at www.orlamining.com/about-us/environmental-social-and-governance-esg.
Environmental, Sustainability, Health & Safety Policy.
The Company is committed to meeting or surpassing regulatory requirements in all of its exploration and development activities while working to protect the environment both within and beyond the Company’s operational boundaries. In keeping with this commitment, Orla has adopted an Environmental, Sustainability and Health & Safety Policy. The Company will conduct all of its operations in a manner that ensures full compliance with its Environmental, Sustainability and Health & Safety Policy, applicable legislation and government requirements. The aim of this policy is to protect the surroundings in which the Company operates, to minimize and manage environmental risk, and to enhance sustainable environmental practices. Orla will ensure that all of its activities are conducted in an environmentally safe and responsible manner and will ensure that its contractors adhere to the same high environmental standards.
Corporate Social Responsibility
The Company is committed to conducting its business in a responsible manner at all times. In keeping with this commitment, Orla has implemented a Corporate Social Responsibility Policy (the “CSR Policy”) which sets out the guidelines by which the Company will (i) endeavour to respect the health and safety of its employees, (ii) protect the environment, (iii) respect the human rights of its employees and the residents in the communities in which the Company operates and (iv) contribute to the sustainable development of those communities.
Human Rights Policy
The Company is committed to respecting the human rights of all individuals impacted by its operations, including local communities and Indigenous peoples and the Company’s employees, contractors, consultants, and other stakeholders. In support of this commitment, the Company has adopted a Human Rights Policy, which sets out the Company’s commitment to human rights and seeks to integrate human rights best practices into the Company’s management, business relationships, governance structures, and programs.
Indigenous Peoples Policy
Further to its Human Rights Policy, the Company also recognizes that it operates within the traditional territories and along-side the communities of a diversity of Indigenous peoples. The Company has therefor adopted an Indigenous Peoples Policy, which confirms the Company’s recognition of the importance of reconciliation between Indigenous peoples and broader society. The Indigenous Peoples Policy reiterates the Company’s commitment to building positive and sustainable relationships with Indigenous peoples, based on trust and respect, and focused on finding common goals through open dialogue. The Company also recognizes the importance of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) and the International Labour Organization Convention 169.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ENVIRONMENT
Mining, exploration, development, and production activities are subject to various levels of federal, provincial, state, and local laws and regulations relating to the protection of the environment at all phases of operation. These regulations govern exploration, development, tenure, production, taxes, labour standards, occupational health, waste disposal, protection and remediation of the environment, reclamation, mine safety, toxic substances management, and other matters. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the general handling, transportation, storage, and disposal of solid and hazardous waste. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors, and employees. To the best knowledge of the Company, it is in compliance with all environmental laws and regulations in effect where its properties are located.
Environmental protection requirements did not have a material effect on the capital expenditures, earnings, or competitive position of Orla during the 2023 financial year and are not expected to have a material effect during the 2024 financial year. Orla is committed to ensuring that all its activities are conducted in an environmentally safe and responsible manner and will require that its contractors adhere to the same high environmental standards.
For 2023, there were no category 4 or 5 incidents across the Company operations and projects as defined by the U.S. Environmental Protection Agency and none of the Company’s sites were charged with fines or sanctions related to environmental incidents.
SOCIAL
OVERVIEW
The Company strives to actively engage and make positive contributions in the communities where it currently operates.
At the Camino Rojo Project, the Company has agreements in place with the ejidos of San Tiburcio, El Berrendo, La Pardita, and San Francisco de los Quijano, with commitments to deliver land leasing payments and certain social support such as scholarships, community infrastructure upgrades, social and economic development initiatives, impact investments, food and medicines to the most vulnerable community members. The Company also established a community response mechanism to receive, document, and resolve community requests, concerns, and complaints. As noted above, the Company has implemented the CSR Policy and has a full-time community relations team for the Camino Rojo Project. The Company has also contracted an independent consulting firm to evaluate the CSR program and advise on its continued development.
At the South Railroad Project, the focus in 2023 for social initiatives was oriented to providing donations to local non-profit organizations, schools, youth activities, and community events, including donations to local charities and local baseball, softball, football, and soccer youth sport programs. The Company has also initiated a plan to map local stakeholders and enhance engagement at the project, and local knowledge of the project by hosting a community meeting to provide introductions and a project overview to Elko County community leaders.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
HEALTH AND SAFETY
The Company is committed to the health and safety of its employees and strives to create and maintain a safe working environment by complying with all applicable health and safety laws, rules, and regulations. Orla acknowledges that there are safety risks associated with its business and, through proactive risk management, continuously aims to minimize and control these risks. The Company now has a Health and Safety department with full time personnel at Camino Rojo and South Railroad and continues to develop Health and Safety policies and procedures to comply with regulations and industry best practices. For 2023, the Company had a lost time injury frequency rate (LTIFR) of 1.71 across all sites. See “Environmental, Social, and Governance – ESH&S Committee and Policies” above for additional information on the Company’s commitment to health and safety.
EMPLOYEES
As at December 31, 2023, the Company had (327) employees, which includes employees located in Canada (25), Panama (8), Mexico (281) and Nevada (13). In addition, there were 286 contractors working on the Camino Rojo Project, two at the corporate offices in Canada, and no contractors on the South Railroad or the Cerro Quema Projects. No management functions of the Company are performed to any substantial degree by a person other than the Directors or executive officers of the Company.
The Company respects and supports the rights of its employees and contractors, including freedom of association and collective bargaining, and the Company promotes ongoing engagement and proactive dialogue with its workers’ unions. In total, approximately 54% of the workforce at Camino Rojo was unionized in 2023. In 2023, Minera Camino Rojo entered into a collective bargaining agreement with the union Sindicato Nacional de Trabajadores Mineros Metalúrgicos y Similares de la República Mexicana, Section #335.
GOVERNANCE
Orla recognizes the importance of corporate governance to the effective management of Orla and to the protection of its stakeholders. Orla’s approach to significant issues of corporate governance is designed with a view of ensuring that the business and affairs of Orla are effectively managed to enhance stakeholder value. Additional information on Orla’s corporate governance practices is contained in Orla’s Management Information Circular dated May 11, 2023, prepared for its most recent annual meeting of shareholders held on June 21, 2023 and filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. This information will also be contained in the Management Information Circular of the Company to be prepared in connection with the Company’s 2024 annual meeting of shareholders currently scheduled to be held in June 2024, which will be available on SEDAR+ at www.sedarplus.cawww.sedarplus.ca and on EDGAR at www.sec.gov. Orla’s current governance policies can be found on Orla’s website at www.orlamining.com/about-us/environmental-social-and-governance-esg/corporate-governance/.
FURTHER INFORMATION
SPECIALIZED SKILL AND KNOWLEDGE
All aspects of the Company’s business require specialized skills and knowledge. Such skills and knowledge include the areas of geology, mining, metallurgy, environmental, permitting, corporate social responsibility, finance, accounting, and legal. Orla faces competition for qualified personnel with these specialized skills and knowledge, which may increase costs of operations or result in delays.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
COMPETITIVE CONDITIONS
The mineral exploration and mining business is competitive. Competition is primarily for: (a) mineral properties that can be developed and operated economically; (b) technical experts that can find, develop, and mine such mineral properties; (c) labour to operate the mineral properties; and (d) capital to finance development and operations.
The Company competes with other mining companies, some of which have greater financial resources and technical facilities, for the acquisition and exploitation of mineral concessions, claims, leases, and other interests, to finance its activities and in the recruitment and retention of qualified employees. The ability of the Company to acquire, develop, and operate precious metal properties will depend not only on its ability to raise the necessary funding and operate its properties economically, but also on its ability to select and acquire suitable prospects for precious metal development and operation or metal exploration. See “Financing Risks” and “Competition” under “Risk Factors”.
BANKRUPTCY AND SIMILAR PROCEDURES
There have been no bankruptcy, receivership, or similar proceedings against the Company or any of its subsidiaries, or any voluntary bankruptcy, receivership, or similar proceedings by the Company or any of its subsidiaries, within the three most recently completed financial years or during or proposed for the current financial year.
FOREIGN OPERATIONS
The locations of the Company’s Camino Rojo Project in Mexico and South Railroad Project in Nevada expose the Company to certain risks, including currency fluctuations and possible political or economic instability that may result in the impairment or loss of mining titles or other mineral rights and opposition from environmental or other non-governmental organizations. Mineral exploration and mining activities in foreign jurisdictions may also be affected in varying degrees by political stability and governmental regulations relating to the mining industry; labour unrest; expropriation; renegotiation, or termination of existing concessions; ability of governments to unilaterally alter agreements; surface land access; illegal mining; changes in taxation policies or laws; and repatriation of funds. Any changes in regulations or shifts in political attitudes in such foreign countries are beyond the Company’s control and may adversely affect the Company’s business.
The Company also holds an interest in the Cerro Quema Project in Panama. In November 2023, Panama passed a legislative moratorium on mining activity and in December 2023, cancelled the Company’s renewal applications for the mining concessions comprising the Cerro Quema Project.
See “Risk Factors – Foreign Country and Political Risk”, “– Foreign Subsidiaries” and “– Cerro Quema Project”.
REORGANIZATIONS
There have been no material reorganizations of the Company or any of its subsidiaries within the three most recently completed financial years or during or proposed for the current financial year.
PRINCIPAL MARKETS AND DISTRIBUTION
The Company currently sells its refined gold and silver to customers located in the United States. The Company evaluates the counterparties to which it sells its product. The Company is not economically dependent on a limited number of customers for the sale of its gold and silver as its products can be sold through numerous world-wide commodity markets, traders, and financial institutions.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
SUMMARY OF MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES
MINERAL RESERVES
The following tables summarize the Company’s Mineral Reserve estimates on its material mineral properties, the Camino Rojo Project and South Railroad Project, in both cases as at the dates set out in the footnotes.
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Proven | Probable | Proven and Probable | ||||||||||||||
| Gold (Au) | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz | ||||
| Mexico | | Camino Rojo | | Oxide | | 14,488 | | 0.78 | | 362 | | 35,917 | | 0.71 | | 821 | | 50,404 | | 0.73 | | 1,183 |
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| Nevada | South Railroad | Oxide | 8,960 | 1.15 | 333 | 56,239 | 0.70 | 1,271 | 65,199 | 0.77 | 1,604 | |||||||||||
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| | | | | Total Gold | **** | 23,448 | 0.92 | 694 | 92,156 | | 0.71 | 2,092 | 115,604 | 0.75 | 2,787 |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Proven | Probable | Proven and Probable | ||||||||||||||
| SILVER (Ag) | | | | | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz |
| Mexico | | Camino Rojo | | Oxide | | 14,488 | | 15.4 | | 7,195 | | 35,917 | | 15.3 | | 17,624 | | 50,404 | | 15.3 | | 24,819 |
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| Nevada | South Railroad | Oxide | 2,049 | 6.6 | 437 | 33,992 | 5.2 | 5,700 | 36,040 | 5.3 | 6,137 | |||||||||||
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| | | | | Total Silver | **** | 16,536 | 14.4 | 7,632 | 69,908 | | 10.4 | 23,324 | 86,445 | 11.1 | 30,956 |
Mineral Reserve Footnotes
All Mineral Reserves
| 1. | The Mineral Reserve estimates have been prepared in accordance with the CIM Standards. |
|---|---|
| 2. | Rounding as required by reporting guidelines may result in summation differences. |
| --- | --- |
| 3. | The estimate of Mineral Reserves may be materially affected by geology, environment, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues. |
| --- | --- |
| 4. | koz = 1,000 troy ounces; t = tonne (1,000 kilograms). |
| --- | --- |
Camino Rojo, Mexico
| 1. | Stephen Ling, P.Eng. Of Orla Mining is the qualified person responsible for the Mineral Reserve estimate for Camino Rojo. |
|---|---|
| 2. | The Mineral Reserve estimate for Camino Rojo has an effective date of December 31, 2023. |
| --- | --- |
| 3. | Mineral Reserves are based on prices of $1,500/oz gold and $20/oz silver. |
| --- | --- |
| 4. | Mineral Reserves are based on net smelter returns (“NSR”) cut-off of $7.34 per tonne. |
| --- | --- |
| 5. | NSR value for leach material is as follows: |
| --- | --- |
| ● | Kp Oxide: NSR ($/t) = 32.80 x gold (g/t) + 0.055 x silver (g/t), based on gold recovery of 70% and silver recovery of 11%. |
| --- | --- |
| ● | Ki Oxide: NSR ($/t) = 26.24 x gold (g/t) + 0.075 x silver (g/t), based on gold recovery of 56% and silver recovery of 15%. |
| --- | --- |
| ● | Tran-Hi: NSR ($/t) = 28.12 x gold (g/t) + 0.136 x silver (g/t), based on gold recovery of 60% and silver recovery of 27%. |
| --- | --- |
| ● | Tran-Lo: NSR ($/t) = 18.74 x gold (g/t) + 0.171 x silver (g/t), based on gold recovery of 40% and silver recovery of 34%. |
| --- | --- |
| 6. | The NSR values account for metal recoveries, refining costs, and refinery payable percentages. |
| --- | --- |
| 7. | Stockpiles are all derived from Camino Rojo mined material and are calculated using reconciled production figures adjusted for mining accuracy. Stockpile grades are calculated from grade control block grades. For the stockpile, no cut‐off grade is used for reporting. |
| --- | --- |
| 8. | See “Mineral Properties – Camino Rojo Project – Mineral Reserves” for additional information. |
| --- | --- |
South Railroad, Nevada
| 1. | The Mineral Reserve estimate for South Railroad has an effective date of February 17, 2022. |
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
| 2. | Consistent with the Company’s other reported Mineral Reserves, the Mineral Reserve estimate for the South Railroad Project in this AIF has been reported in metric units, which has been converted from Imperial system units currently in use at South Railroad and in the South Railroad Report (as defined below), using a conversion rate of 0.9071847 between short tonnes and metric tonnes and a conversion rate of 34.285718 between oz/short ton and g/metric tonne. |
|---|---|
| 3. | The qualified person responsible for the Mineral Reserves at South Railroad is Jordan M. Anderson of RESPEC Company LLC (“RESPEC”), formerly Mine Development Associates (“MDA”). |
| --- | --- |
| 4. | Mineral Reserves were defined based on pit designs that follow Whittle optimized pit shells created using $1,450 per oz Au and $18.76 per oz Ag. Pit designs followed pit slope recommendations provided by Golder and Associates. |
| --- | --- |
| 5. | Reserves are reported using break-even cut-off grades based on variable recoveries provided by Gary L. Simmons and processing and general and administrative costs: |
| --- | --- |
| ● | Dark Star leach cut-off grade 0.17g/t. |
| --- | --- |
| ● | Pinion oxide leach cut-off grade 0.17 g/t. |
| --- | --- |
| ● | Pinion transition leach cut-off grade 0.24 g/t. |
| --- | --- |
| 6. | Silver is reported for Pinion reserves only. |
| --- | --- |
| 7. | The Mineral Reserves point of reference is the point where is material is placed onto the leach pad. |
| --- | --- |
| 8. | Energy prices of $0.66 per liter of off-road diesel were used to estimate mining costs. |
| --- | --- |
| 9. | See “Mineral Properties – South Railroad Project – Mineral Reserves” for additional information. |
| --- | --- |
MINERAL RESOURCES
The following tables summarize the Company’s Mineral Resource estimates on its material mineral properties, the Camino Rojo Project and South Railroad Project, in both cases as at the dates set out in the footnotes.
Measured and Indicated Resources
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Measured | Indicated | Measured and Indicated | ||||||||||||||
| Gold (Au) | | | | | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz |
| Mexico | | Camino Rojo | | Oxide | | 17,715 | | 0.79 | | 449 | | 60,916 | | 0.71 | | 1,396 | | 78,631 | | 0.73 | | 1,846 |
| | | Sulphide | 3,358 | 0.69 | 74 | 255,445 | 0.88 | 7,221 | 258,803 | 0.88 | | 7,296 | ||||||||||
| Nevada | South Railroad | Oxide | 9,561 | 1.12 | 343 | 65,450 | 0.67 | 1,410 | 75,011 | 0.73 | 1,753 | |||||||||||
| | | Sulphide | — | — | — | 311 | 3.10 | 31 | 311 | 3.10 | | 31 | ||||||||||
| | | | | Total Gold | **** | 30,633 | 0.88 | 866 | 382,122 | | 0.82 | 10,059 | 412,755 | 0.82 | 10,925 |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Measured | Indicated | Measured and Indicated | ||||||||||||||
| Silver (Ag) | | | | | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz | | 000’s t | **** | g/t | **** | koz |
| Mexico | | Camino Rojo | | Oxide | | 17,715 | | 14.5 | | 8,285 | | 60,916 | | 12.8 | | 25,010 | | 78,631 | | 13.2 | | 33,295 |
| | | Sulphide | 3,358 | 9.1 | 997 | 255,445 | 7.4 | 60,606 | 258,803 | 7.4 | | 61,603 | ||||||||||
| Nevada | South Railroad | Oxide | 2,336 | 6.5 | 488 | 41,193 | 5.0 | 6,617 | 43,529 | 5.1 | 7,105 | |||||||||||
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| | | | | Total Silver | **** | 23,409 | 13.0 | 9,770 | 357,554 | | 8.0 | 92,233 | 380,963 | 8.3 | 102,003 |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Measured | Indicated | Measured and Indicated | ||||||||||||||
| Lead (Pb) | | | | | | 000’s t | **** | % | **** | Mlb | | 000’s t | **** | % | **** | Mlb | | 000’s t | **** | % | **** | Mlb |
| Mexico | | Camino Rojo | | Oxide | | — | | — | | — | | — | | — | | — | | — | | — | | — |
| | | Sulphide | 3,358 | 0.13 | % | 9 | 255,445 | 0.07 | % | 404 | 258,803 | 0.07 | % | 414 | ||||||||
| Nevada | South Railroad | Oxide | — | — | — | — | — | — | — | — | — | |||||||||||
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| | | | | Total Lead | **** | 3,358 | 0.13 | % | 9 | 255,445 | | 0.07 | % | 404 | 258,803 | 0.07 | % | 414 |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Measured | Indicated | Measured and Indicated | ||||||||||||||
| Zinc (Zn) | | | | | | 000’s t | **** | % | **** | Mlb | | 000’s t | **** | % | **** | Mlb | | 000’s t | **** | % | **** | Mlb |
| Mexico | | Camino Rojo | | Oxide | | — | | — | | — | | — | | — | | — | | — | | — | | — |
| | | Sulphide | 3,358 | 0.38 | % | 28 | 255,445 | 0.26 | % | 1,469 | 258,803 | 0.26 | % | 1,497 | ||||||||
| Nevada | South Railroad | Oxide | — | — | — | — | — | — | — | — | — | |||||||||||
| | | Sulphide | — | — | — | — | — | — | — | — | | — | ||||||||||
| | | | | Total Zinc | **** | 3,358 | 0.38 | % | 28 | 255,445 | | 0.26 | % | 1,469 | 258,803 | 0.26 | % | 1,497 |
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Inferred Mineral Resources
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Inferred | | Inferred | ||||||||||||||
| Gold (Au) | | | | | | 000’s t | **** | g/t | **** | koz | | Silver (Ag) | | 000’s t | **** | g/t | **** | koz | ||||
| Mexico | | Camino Rojo | | Oxide | | 4,258 | | 0.60 | | 83 | | Mexico | | Camino Rojo | | Oxide | | 4,258 | | 5.7 | | 773 |
| | | Sulphide | 56,564 | 0.87 | 1,577 | | | Sulphide | 56,564 | 7.5 | | 13,713 | ||||||||||
| Nevada | South Railroad | Oxide | 18,662 | 0.45 | 271 | Nevada | South Railroad | Oxide | 1,178 | 2.4 | 92 | |||||||||||
| | | Sulphide | 3,601 | 3.87 | 448 | | | Sulphide | — | — | | — | ||||||||||
| | | | | Total Gold | **** | 83,084 | 0.89 | 2,379 | | | | Total Silver | 62,000 | 7.31 | 14,578 |
| | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Inferred | | Inferred | ||||||||||||||
| Lead (Pb) | | | | | | 000’s t | **** | % | **** | Mlb | | Zinc (Zn) | | 000’s t | **** | % | **** | Mlb | ||||
| Mexico | | Camino Rojo | | Oxide | | — | | — | | — | | Mexico | | Camino Rojo | | Oxide | | — | | — | | — |
| | | Sulphide | 56,564 | 0.05 | % | 63 | | | Sulphide | 56,564 | 0.23 | % | 290 | |||||||||
| Nevada | South Railroad | Oxide | — | — | — | Nevada | South Railroad | Oxide | — | — | | — | ||||||||||
| | | Sulphide | — | — | — | | | Sulphide | — | — | | — | ||||||||||
| | | | | Total Lead | **** | 56,564 | 0.05 | % | 63 | | | | Total Zinc | | 56,564 | 0.23 | % | 290 |
Mineral Resource Notes
All Mineral Resources
| 1. | All figures are rounded to reflect the relative accuracy of the estimate and therefore numbers may not appear to add precisely. Columns may not sum exactly due to rounding. |
|---|---|
| 2. | Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. Mineral Resources are inclusive of Mineral Reserves. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration. |
| --- | --- |
| 3. | The Mineral Resource estimates have been prepared in accordance with the CIM Standards. |
| --- | --- |
| 4. | koz = 1,000 troy ounces; mlb = million pounds (imperial); t = tonne (1,000 kilograms). |
| --- | --- |
Camino Rojo, Mexico
| 1. | The effective dates of the Mineral Resource estimates for Camino Rojo are: (i) December 31, 2023, for the oxides (leach material); and (ii) June 7, 2019 for the sulphides (mill material). The oxide Mineral Resource estimate has been updated from the 2022 Camino Rojo Report to account for depletion from mining operations at the Camino Rojo Oxide Mine and for current gold and silver price and costs. |
|---|---|
| 2. | Michael G. Hester, FAusIMM, of IMC, is the qualified person responsible for the Mineral Resource estimate for Camino Rojo. |
| --- | --- |
| 3. | Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. |
| --- | --- |
| 4. | Mineral Resources for leach (oxide) material are based on prices of $1,800/oz gold and $23/oz silver. |
| --- | --- |
| 5. | Mineral Resources for mill (sulphide) material are based on prices of $1,400/oz gold, $20/oz silver, $1.05/lb lead, and $1.20/lb zinc. |
| --- | --- |
| 6. | Mineral Resources are based on NSR cut-off grades of $7.20/t for leach material and $13.71/t for mill material. |
| --- | --- |
| 7. | NSR value for leach material is as follows: |
| --- | --- |
| ● | Kp Oxide: NSR ($/t) = 39.38 x gold (g/t) + 0.066 x silver (g/t), based on gold recovery of 70% and silver recovery of 11% |
| --- | --- |
| ● | Ki Oxide: NSR ($/t) = 31.50 x gold (g/t) + 0.089 x silver (g/t), based on gold recovery of 56% and silver recovery of 15% |
| --- | --- |
| ● | Tran-Hi: NSR ($/t) = 33.75 x gold (g/t) + 0.161 x silver (g/t), based on gold recovery of 60% and silver recovery of 27% |
| --- | --- |
| ● | Tran-Lo: NSR ($/t) = 22.50 x gold (g/t) + 0.202 x silver (g/t), based on gold recovery of 40% and silver recovery of 34%. |
| --- | --- |
| 8. | NSR value for mill material is 36.75 x gold (g/t) + 0.429 x silver (g/t) + 10.75 x lead (%) + 11.77 x zinc (%), based on recoveries of 86% gold, 76% silver, 60% lead, and 64% zinc. |
| --- | --- |
| 9. | The NSR values account for metal recoveries, refining costs, and refinery payable percentages. |
| --- | --- |
| 10. | Includes 2.5% NSR royalty and a US dollar:Mexican Peso exchange rate of 1:19.3. |
| --- | --- |
| 11. | Mineral Resources are reported in relation to a conceptual constraining pit shell in order to demonstrate reasonable prospects for eventual economic extraction, as required by the definition of Mineral Resource in NI 43-101; mineralization lying outside of the pit shell is excluded from the Mineral Resource. |
| --- | --- |
| 12. | The Mineral Resource estimate assumes that the conceptual constraining pit shell used to constrain the estimate extends onto land held by Fresnillo. Any potential development of the Camino Rojo Project that includes an open pit encompassing the entire Mineral Resource estimate (particularly Mineral Resources amenable to milling) would be dependent on obtaining an agreement with Fresnillo (in addition to the Layback Agreement, which is only with respect to a portion of the heap leach material included in the Mineral Reserve estimate). |
| --- | --- |
| 13. | The Mineral Resources are inclusive of those Mineral Resources that were converted to Mineral Reserves. |
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| 14. | The Mineral Resources reported are contained on mineral titles controlled by Orla and mineral titles in the existing Layback Agreement with Fresnillo. |
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| 15. | Stockpiles are all derived from Camino Rojo mined material and are calculated using reconciled production figures adjusted for mining accuracy. Stockpile grades are calculated from grade control block grades and depleted by mining accuracy where appropriate. For the stockpile, no cut‐off grade is used for reporting. |
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| 16. | See “Mineral Properties – Camino Rojo Project – Mineral Resources” for additional information. |
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South Railroad, Nevada
| 1. | The effective date of all Mineral Resources at the South Railroad Project is January 31, 2022. |
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| 2. | Michael S. Lindholm, CPG, of RESPEC, is the qualified person responsible for the Mineral Resource estimate for the South Railroad Project. |
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| 3. | Consistent with the Company’s other reported Mineral Resources, the Mineral Resource estimate for the South Railroad Project in this AIF has been reported in metric units, which have been converted from Imperial system units currently in use at South Railroad and in the South Railroad Report, using conversion factors of 0.90718474 between short tons and metric tonnes and 34.285714 between oz/short ton and g/metric tonne*.* |
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| 4. | For all deposits, the cutoff for open pit oxide and transitional Mineral Resources is 0.171 g/t Au, and for sulfide Mineral Resources is 1.543 g/t Au. The cutoff for underground sulphide Mineral Resources is 3.429 g/t Au. |
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| 5. | Resources are based on a US$1,750/oz gold price. The silver prices were adjusted to maintain a constant silver to gold ratio, which is $22.64/oz at the resource base case. |
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| 6. | Metallurgical recoveries for optimization were applied as follows: |
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| ● | Dark Star – ROM recoveries vary based on formulas using model block gold grade, redox zone and silicification zone. |
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| ● | Pinion – ROM recoveries vary based on formulas using model block gold grade, redox zone, silicification zone and lithology. |
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| ● | Jasperoid Wash – ROM recoveries vary based on gold grade. |
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| ● | North Bullion – Oxide recovery is 70% from heap leach pad, Sulphide recovery is 85% from mill. |
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| ● | The Mineral Resource has been confined by “reasonable prospects of eventual economic extraction” open pits and underground shells. |
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| 7. | Pit slope angles are: |
| --- | --- |
| ● | Dark Star – Varies from 35 degrees to 47 degrees depending on lithology and face direction. |
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| ● | Pinion – Varies from 31 degrees to 52 degrees depending on lithology and face direction. |
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| ● | Jasperoid Wash and North Bullion – 45 degrees. |
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| 8. | Bulk density measurements were obtained by the immersion method on drill core samples, and applied bedrock densities are: |
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| ● | Dark Star - 2.27 to 2.63 |
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| ● | Pinion - 2.46 and 3.00 |
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| ● | Jasperoid Wash - 2.40 to 2.55 |
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| ● | North Bullion – 2.34 to 2.80, quantity of density data for Sweet Hollow, POD and South Lodes is minimal, so density data from other deposits in the same formations was used. |
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| 9. | Due to a lack of silver outside Pinion, silver resources are reported for Pinion only rather than as consolidated resources to avoid reporting erroneous average silver grade. |
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| 10. | See “Mineral Properties – South Railroad Project – Mineral Resources” for additional information. |
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MINERAL PROJECTS
The Company’s focus is on the acquisition, exploration, development and exploitation of mineral properties in which the Company’s exploration, development, and operating expertise could substantially enhance shareholder value. The Company’s two material projects are the Camino Rojo Project and the South Railroad Project. The Company also holds a 100% interest in the Cerro Quema Project and the Lewis project (the “Lewis Project”) located in Nevada. The Cerro Quema Project and the Lewis Project are not considered to be material projects for the Company for the purposes of NI 43-101. The Company previously held an interest in the Monitor Gold exploration project located in Nevada, however, the Company terminated its interest in this project in 2023.
THE CAMINO ROJO PROJECT
The following disclosure relating to the Camino Rojo Project has been derived, in part, from the 2021 Camino Rojo Report for the Camino Rojo Project, prepared by Carl E. Defilippi, RM, SME of Kappes, Cassiday and Associates (“KCA”), Matthew D. Gray, Ph.D., C.P.G. of Resource Geosciences Incorporated (“RGI”), Michael G. Hester, FAusIMM of IMC and John J. Ward, C.P.G. of John Ward, RG, Groundwater Consultant, LLC, each of whom is independent of the Company and a qualified person under NI 43-101. Reference
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should be made to the full text of the 2021 Camino Rojo Report, which is available under the Company’s profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov, as the 2021 Camino Rojo Report contains additional assumptions, qualifications, references, reliances, and procedures that are not fully described herein.
Unless otherwise indicated, technical information disclosed herein since the release of the 2021 Camino Rojo Report has been updated under the supervision of, or reviewed, in the case of Mineral Resources, by Michael G. Hester, FAusIMM, at IMC, and in the case of mining and Mineral Reserves, by Stephen Ling, P.Eng., Director of Technical Services at Orla, each of whom is a “Qualified Person” under NI 43-101.
PROJECT DESCRIPTION, LOCATION, AND ACCESS
The Camino Rojo Project is a gold-silver-lead-zinc deposit located in the Municipality of Mazapil, State of Zacatecas, Mexico near the village of San Tiburcio. The project lies 190 km northeast of the city of Zacatecas, 48 km south-southwest of the town of Concepcion del Oro, Zacatecas, 260 km southwest of Monterrey, and 54 km south-southeast of Newmont’s Peñasquito Mine. The Camino Rojo Project area is centered at approximately 244150E 2675900N UTM NAD27 Zone 14N.
Access to the project site is by the paved four lane Mexican Highway 54 and Route 62, a secondary paved highway that passes through San Tiburcio. Access to the project is limited to one main gate to access process and camp areas, ensuring only authorized employees, contractors, and visitors are allowed onto the property or inside the critical facilities.
Both Monterrey and Zacatecas have airports with regularly scheduled flights south to Mexico City or north to the USA. There are numerous gravel roads within the property linking the surrounding countryside with the two highways, Highways 54 and 62, which transect the property. In addition, there is a railway approximately 40 km east of San Tiburcio. There are very few locations within the property that are not readily accessible by four-wheel drive vehicles.
The Camino Rojo property consisted of seven concessions held by Minera Camino Rojo, a subsidiary of Orla, covering in aggregate 138,636 ha, with one concession expiring in 2057 and the remaining six expiring in 2058. As part of the requirements to maintain the concessions in good standing, bi-annual fees must be paid based upon a per-hectare escalating fee, work expenditures must be incurred in amounts determined on the basis of concession size and age, and applicable environmental regulations must be respected.
Pursuant to the agreement whereby Orla acquired the Camino Rojo Project from Goldcorp (which was subsequently acquired and is wholly-owned by Newmont^1^ ) (the “Camino Agreement”), Newmont was granted a 2% NSR on all metal production from the Camino Rojo Project, except for metals produced under the sulphide joint venture option stipulated in the Camino Agreement. On October 29, 2020, this 2% NSR royalty that pertains to oxide material was acquired by Maverix Metals Inc. (which was subsequently acquired and is wholly-owned by Triple Flag Previous Metals Corp). A 0.5% royalty is also payable to the Mexican government as an Extraordinary Mining Duty, mandated by Federal law, and applies to precious metal production from all mining concessions, regardless of owner or other royalty encumbrances. A Special Mining Duty of 7.5% is also payable to the Mexican government on income derived from mineral production.
Orla is the operator of the Camino Rojo Project and has full rights to explore, evaluate, and exploit the property. Pursuant to the option agreement dated November 7, 2017 between Newmont and the Company, if a sulphide project is defined through a positive Pre-Feasibility Study outlining one of the development scenarios A or B below, Newmont may, at its option, enter into a joint venture for the purpose of future exploration, advancement, construction, and exploitation of the sulphide project.
| ● | Scenario A: A sulphide project where material from the Camino Rojo Project is processed using the existing infrastructure of the Peñasquito mine, mill and concentrator facilities. In such circumstances, the sulphide project would be operated by Newmont, who would earn a 70% interest in the sulphide project, with Orla owning 30%. |
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^1^ Note: Where applicable, all references to Goldcorp in this AIF have been changed to Newmont.
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| ● | Scenario B: A standalone sulphide project with a mine plan containing at least 500 million tonnes of Proven and Probable Mineral Reserves using standalone facilities not associated with Peñasquito. Under this scenario, the sulphide project would be operated by Newmont, who would earn a 60% interest in the sulphide project, with Orla owning 40%. |
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Following exercise of its option, if Newmont elects to sell its portion of the sulphide project, in whole or in part, then Orla would retain a right of first refusal on the sale of the sulphide project.
On December 21, 2020, Orla announced that it had completed the Layback Agreement with Fresnillo, granting Orla the right to expand the Camino Rojo oxide pit onto 21.8 ha of Fresnillo’s 782 ha “Guachichil D1” mineral concessions, Title 245418, located immediately to the north of Orla’s property. The Layback Agreement is only with respect to the portion of the heap leach material included in the Mineral Reserve. As such, any potential development of the Camino Rojo Project that includes an open pit encompassing the entire Mineral Resource estimate would be dependent on an additional agreement with Fresnillo (or any potential subsequent owner of the mineral titles).
Surface rights in the project area are owned by several Ejidos, which are Federally defined agrarian communities and private landowners. The land overlying the Mineral Resource at the Camino Rojo Project, is controlled by Orla under an agreement with the San Tiburcio Ejido, comprised of approximately 360 voting members who collectively control 37,154 ha. Exploration work at the Camino Rojo Project has been carried out under the terms of surface access agreements negotiated with the San Tiburcio Ejido and two neighbouring Ejidos.
Camino Rojo SA de CV (then, a Goldcorp subsidiary) executed two agreements that are still current with the San Tiburcio Ejido that cover the Camino Rojo deposit. Camino Rojo SA de CV subsequently passed the rights and obligations of these agreements to Minera Peñasquito SA de CV (then, a Goldcorp subsidiary), who subsequently transferred the rights and obligations to Minera Camino Rojo. Another agreement to cover surface access for exploration was signed in 2018.
The two agreements currently in effect with Ejido San Tiburcio are:
| (a) | Previous to Expropriation Occupation Agreement (“COPE”) executed on February 26, 2013 by and between Camino Rojo SA de CV, in its position of “occupant”, and Ejido San Tiburcio, as the owner, with regards to a surface of 2,497.30 ha. In 2022, this surface area was expanded to 2,524.80 ha. The rights and obligations of this agreement were passed to Minera Camino Rojo and the agreement stipulates that the Ejido expressly and voluntarily accepts the expropriation of Ejido lands by Minera Camino Rojo, in effect converting the Ejido land to fee simple private land titled to Minera Camino Rojo. In the event that the Federal agency responsible for the expropriation process, the Secretario de Desarollo Agrario Territorial y Urbano, denies the petition to cede the Ejido lands to Minera Camino Rojo, the agreement automatically converts to a 30-year temporary occupation agreement. Payments are due on a monthly basis and Minera Camino Rojo has made all required payments. This agreement is valid and expires in 2043 and covers the area of the Mineral Resources and Mineral Reserves estimate disclosed in this AIF. |
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| (b) | Collaboration and Social Responsibility Agreement (“CSRA”), executed on February 26, 2013 by and between Camino Rojo SA de CV, in its position of “collaborator”, and Ejido San Tiburcio, as “beneficiary”, with regards to certain social contributions to be provided in favour of this last CSRA. The rights and obligations of this agreement were passed to Minera Camino Rojo and the agreement stipulates that Minera Camino Rojo will contribute 10,000,000 Pesos annually to the Ejido to be used to promote and execute diverse social and economic development programs to benefit the Ejido. Additionally, at its discretion, Minera Camino Rojo will provide support for adult education, career training, business development assistance, cultural programs, and scholastic scholarships. The agreement expires when exploration or exploitation activities at the Camino Rojo Project end. Minera Camino Rojo has made all required payments, thus this agreement is valid and remains in effect until mine closure or project cancellation. |
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Minera Camino Rojo signed a Temporary Occupation Agreement (“COT”) with Ejido La Pardita on August 4, 2022 that covers 4,205 ha for a three-year period expiring on August 3, 2025. This COT requires annual payments of $3,574,250 Pesos. None of the Mineral Resources or Mineral Reserves disclosed in this AIF, nor proposed infrastructure, is located on Ejido La Pardita land. Minera Camino Rojo has made all required payments and the agreement is in good standing.
Minera Camino Rojo signed a COT with Ejido San Francisco Los Quijano on July 22, 2021 that covers 5,322 ha for a four-year period expiring on July 22, 2025. This COT requires annual payments of $4,532,200 Pesos. None of the Mineral Resources or Mineral Reserves disclosed in this AIF, nor proposed infrastructure, is located on Ejido San Francisco Los Quijano land. Minera Camino Rojo has made all required payments and the agreement is in good standing.
Fresnillo controls surface rights needed for exploration and mining on the Guachichil D1 mineral concession. Pursuant to the Layback Agreement, 27.5 ha of surface rights controlled by Fresnillo has been acquired by Minera Camino Rojo to mine on a portion of the Guachichil D1 mineral concession that covers the area outside of the Orla concession required for the Camino Rojo Oxide Mine.
No environmental liabilities are apparent on the Camino Rojo Project property. Prior to Orla’s development of the Camino Rojo Project, the property did not contain active or historic mines or prospects, and there were no pre-existing plant facilities nor tailings piles present within the project area. All exploration work has been carried out by Minera Camino Rojo and prior operators in accordance with Mexican environmental standards and regulations. Conditional upon continued compliance, permits for normal exploration activities are expected to be readily attainable.
Exploration and mining activities in Mexico are subject to control by the federal agency of the Secretaria del Medio Ambiente y Recursos Naturales (Secretary of the Environment and Natural Resources), known by its acronym “SEMARNAT”, which has authority over the two principal Federal permits:
| ● | a Manifesto de Impacto Ambiental (Environmental Impact Statement), known by its acronym as an “MIA” accompanied by an Estudio de Riesgo (Risk Study); and |
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| ● | Cambio de Uso de Suelo (Change of Land Use) permit, known by its acronym as a “CUS”, supported by an Estudio Tecnico Justificativo (Technical Justification Study). |
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The Company submitted MIA and CUS permit applications to SEMARNAT on August 29, 2019 and August 30, 2019, respectively, for the construction and operation of an open pit mine as per the project described in the 2019 Camino Rojo Report. Federal environmental authorities approved the CUS permit in December 2019, Minera Camino Rojo made the requisite payment to the National Forestry Commission on January 23, 2020 and Minera Camino Rojo received the CUS permit on February 6, 2020, allowing mine development and operation affecting 816.25 ha. The project as described in the 2021 Camino Rojo Report will require an additional CUS permit to allow for additional surface disturbances related to development of a pit layback onto lands not considered in the August 2019 CUS permit application. The application for the additional CUS permit was submitted to SEMARNAT in February 2023. In July 2023, the permit was declined for procedural reasons due to SEMARNAT’s internal process timelines. We expect to resubmit the additional CUS permit application in 2024.
With respect to the MIA, Minera Camino Rojo received the MIA permit on August 11, 2020, authorizing mine construction and operation of the project described in the 2019 Camino Rojo Report. The project described in the 2021 Camino Rojo Report requires a modification of the MIA permit to allow for additional production related to development of a pit layback onto lands not considered in the August 2019 permit application, which the Company submitted. In March 2022, the Company submitted for a second modification of the MIA permit to allow for the open pit east-west expansion, as well as waste and low-grade ore stockpiles. In 2024, both MIA modifications were not approved by SEMARNAT. The Company is in discussion with SEMARNAT to obtain clarity on the reasons for the non-approval. The Company is in the process of appealing these decisions and will refile a request for modification of the MIA in
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- The Company does not expect these delays in receiving the requested amendments to have an impact on the 2024 production guidance.
Federal regulations require staged postings of a bond or financial guarantee for the estimated cost of reclamation, proportional to the pending reclamation work created by the project in each development phase, as determined by a technical economic study. On November 11, 2020, Minera Camino Rojo submitted the required first stage reclamation bond of 89.5 Mexican Pesos (approximately $4.5 million) which was accepted by the Federal Treasury, with formal notice given to the Procuraduria Federal de Proteccion al Ambiente on November 13, 2020. All MIA and CUS permit conditions were satisfied, which allowed for site activities to commence for the Project described in the 2019 Camino Rojo Report. In November 2023, the reclamation bond was renewed for $210.8 million Mexican Pesos (approximately $12.47 million). The increase related to additional disturbance from site activities.
Minera Camino Rojo currently has all major permits required to operate the project described in the 2019 Camino Rojo Report, including the permits by the Secretaría de la Defensa Nacional for the purchase, storage and use explosives in mining activities. There are no impediments to mining and processing activities for the already authorized project. Minera Camino Rojo commenced the start of earthworks on November 26, 2020. Camino Rojo achieved first gold pour on December 13, 2021 and reached commercial production effective April 1, 2022.
Approximately two-thirds of the Mineral Reserves described below are within the currently permitted mine plan. The remaining portion will require additional permits for an expanded pit, as further described above. These permits are expected to be approved in a reasonable timeline.
HISTORY
The mining concessions comprising the Camino Rojo property were originally staked to the benefit of Canplats de Mexico, S.A. de C.V., a subsidiary of Canplats Resources Corporation (“Canplats”), in 2007. By August of 2008, Canplats drilled a total of 92 RC, and 30 diamond-core holes, for a total of 23,988 and 16,044 m respectively. In October 2009, Canplats publicly released a PEA on the project, which is historical in nature and is no longer current and should not be relied upon.
Canplats was acquired by Goldcorp in early 2010. By the end of 2015, Goldcorp had a total of 295,832 m in 445 diamond core holes, 44,557 m in 188 RC drill holes, and 31,286 m of rotary air blast (“RAB”) drilling had been completed. Airborne gravity, magnetic and transient electromagnetic (“TEM”) surveys were also carried out.
Mineral Reserve and Mineral Resource tabulations for the Camino Rojo Project were publicly disclosed by Goldcorp as recently as June 2016. The Goldcorp estimates are regarded as historical estimates only and have since been replaced by the current Mineral Reserve and Mineral Resource estimates as detailed above under the heading “Summary of Mineral Reserves and Mineral Resources”.
Orla acquired the Camino Rojo Project from Goldcorp in 2017.
For information on mineral production from the Camino Rojo Project subsequent to the 2021 Camino Rojo Report, see “Production, Outlook, and Future Plans” below.
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GEOLOGICAL SETTING, MINERALIZATION, AND DEPOSIT TYPES
Regional, Local and Property Geology
The Camino Rojo Project deposit is located beneath a broad pediment of Tertiary and Quaternary alluvium along the boundary between the Mesa Central physiographic province and the Sierra Madre Oriental fold and thrust belt near the pre-Laramide continental-margin. Oldest rocks are Triassic metamorphic continental rocks overlain by Early to Middle Jurassic red beds. Upper Jurassic to Upper Cretaceous marine facies rocks overlie the red beds at a disconformity and comprise a package of shelf carbonate rocks comprising the Zuloaga to Cuesta del Cura Formations and the basin-filling flysch sediments of the Indidura and Caracol Formations. The deposit lies within the southern extent of the northwest striking San Tiburcio fault zone.
On the Camino Rojo Project, a gold-silver-zinc-lead deposit lies concealed below shallow (<1 m to 3 m) alluvial cover in a large pediment along the southwest border of the Sierra Madre Oriental. Small water storage pits and trenches expose a portion of the oxide deposit in the discovery area known as Represa zone. The Late Cretaceous Caracol Formation is the primary mineralization host, and at depth, the upper Indidura Formation is a minor mineralization host along the Caracol contact. The gold-silver-lead-zinc deposit is situated above, and extends down into, a zone of feldspathic hornfels developed in the sedimentary strata, and variably mineralized dacitic dikes. The mineralized zones correspond to zones of sheeted sulfidic veins and veinlet networks, creating a bulk-mineable style of gold mineralization. Skarn mineralization has been encountered in the deeper portions of the system. The observed geologic and geochemical characteristics of the gold-silver-lead-zinc deposit at Camino Rojo are consistent with those of a distal oxidized gold skarn deposit. The metal suite and style of mineralization at Camino Rojo are similar to the intrusion-related deposits in the Caracol Formation and underlying carbonate rocks adjacent to the diatremes at the Peñasquito mine.
Mineralization styles in the region include polymetallic and copper-gold skarn and limestone manto (replacement) silver-lead-zinc sulphide ores in the Concepcion del Oro District, approximately 50 km north-northeast of the Camino Rojo Project, and gold-silver-lead-zinc mineralized igneous diatreme-breccia, and sulphide-sulosalt-carbonate veinlets and fracture filings in the Caracol Formation at Newmont’s Peñasquito mine.
Mineralized Zones
The Camino Rojo deposit comprises intrusive related, clastic sedimentary strata hosted polymetallic gold, silver, arsenic, zinc, and lead mineralization.
Three stages of mineralization, including two styles of high-grade gold-silver mineralization, have been observed in the Camino Rojo deposit:
| ● | Stage 1 K-metasomatism (adularia)-pyrite – K-metasomatism with disseminated pyrite replaced the mudstone, siltstone and fine-grained sandstones in the Caracol Formation. Mineralization is typically low-grade gold with 0.1-0.4 g/t. |
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| ● | Stage 2 Intermediate Sulphidation (“IS”) veins – IS veins with pyrite-arsenopyrite-sphalerite±galena, calcite and minor quartz. Moderate to high grade gold (0.4 to +4.0 g/t), high zinc grades (0.5 to >2.0% Zn) and high values of As, Pb and Ba, with variable Ag. |
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| ● | Stage 3 LS veins – colloform banded quartz veins, drusy-coxcomb quartz veins, and quartz-cemented, polymictic hydrothermal breccia with pyrite-galena-sulphosalts, adularia and electrum. Moderate to high gold grades (2.0 to 15.0 g/t) with high silver (100 to 500 g/t), and high As and Sb values, but variable to low Zn, Pb, and Ba values. |
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At hand specimen scale, mineralization is controlled by bedding and fractures. The sandy and silty beds of the turbidite sequences of the Caracol Formation are preferentially mineralized, with pyrite disseminations and semi-massive stringers hosted within them, presumably due to higher syn-mineralizing fluid porosity and permeability relative to the enclosing shale beds. Basal layers of the turbiditic sandstone beds are often preferentially mineralized. Bedding discordant open space filling fractures and structurally controlled breccia zones host banded sulphide veins and sulphide matrix breccias. Some higher-grade vein and breccia zones are localized along the margins of dikes of intermediate composition. Gold-silver mineralization has been observed in drill core over vertical intervals greater than 400 m, with gold-silver mineralization occurring in a broad NE-SW trending elongate zone as much as 300 m wide and 700 m long.
Oxidation was observed to range from complete oxidation in the uppermost portions of the deposit, generally underlain or surrounded by a zone of mixed oxide and sulphide mineralization where oxidation is complete along fracture zones and within permeable strata, but lacking in the remainder of the rock, which then is generally underlain by a sulphide zone in which no oxidation is observed. Oxidation of the deposit is approximately 100%, generally extending from surface to depths of 100 m to 150 m and to depths of as much as 400 m along fracture zones. The underlying transitional zone of mixed oxide/sulphide extends over a vertical interval in excess of 100 m and is characterized by partial oxidation controlled by bedding and fractures. The sandy layers of the turbiditic sequence are preferentially oxidized, creating a stratigraphically interlayered sequence of oxide and sulphide material at the centimetre-scale, with oxidation along structures affecting all strata. Gold bearing strata of the of the Caracol Formation are preferentially oxidized and auriferous zones range from partially to completely oxidized, thus the metallurgical characteristics of mixed oxide/sulphide may vary greatly, with some material exhibiting characteristics similar to oxide material.
The 2021 Camino Rojo Report concludes that the distribution of mineralization at Camino Rojo is controlled by both primary bedding and discordant open space filling structures. Pervasive, near surface oxidation extends to depths in excess of 100 m and extends to greater depths along structurally controlled zones of fracturing and permeability.
Deposit Types
The observed geologic and geochemical characteristics of the gold-silver-lead-zinc deposit are consistent with those of a distal oxidized gold skarn deposit. The near surface portion of the Camino Rojo deposit has characteristics consistent with those of the distal skarn zone, transitional to epithermal mineralization, and overlies garnet bearing skarn mineralization encountered in the deeper portions of the system. Skarn deposits often exhibit predictable patterns of mineral zoning and metal zoning. Application of skarn zoning models to exploration allows for inferences about the possible lateral and depth extents of the mineralized system at the Camino Rojo deposit and can be used to guide further exploration drill programs.
EXPLORATION AND DRILLING
2021 Camino Rojo Report
Orla has conducted reconnaissance geological evaluations of portions of its mining concessions. Exploration activities completed included: geologic mapping; rock chip and soil geochemical sampling; and IP geophysical surveys. As of the effective date of the 2021 Camino Rojo Report, 695.2 line-km of IP surveys had been completed in four separate grids over the known area of mineralization, over the proposed area of infrastructure development, and to the west and south of the resource area, and over five separate grids in the Camino Rojo 5 concession. All grids were designed with 400 m line separation and stations every 100 m. Dipole spacing was selected to search for features at depths greater than 100 to 200 m. Chargeability anomalies with some similarities to the Camino Rojo deposit were identified. Three anomalies in the vicinity of the Represa zone were drill tested by nineteen RC holes totalling 5,662.5 m. No significant mineralization was encountered. Five separate IP grids in the Camino 5 claim defined several chargeability anomalies with some similarities to the Camino Rojo Project. As of the date of the 2021 Camino Rojo Report, one of the chargeability anomalies at the Las Miserias target has been drill tested by seven RC drillholes totaling 2,096.5 m. No significant mineralization was encountered.
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A small orientation soil survey was conducted over the resource area and 66 soil samples were collected. Results from the survey indicate the geochemical “halo” over the deposit is tightly restricted to sub/outcrop. Anomalous gold (>0.2 g/t) is most closely associated with elevated arsenic (>100 parts per million (“ppm”)) and zinc (>300 ppm). More than 1,500 rock chip samples have been collected from throughout the mining concessions comprising the project. No significant rock chip gold anomalies were identified, but low-level anomalies were detected in the Las Miserias area, associated with a silicified breccia and a chargeability anomaly.
Regional exploration continues to field check interpreted targets, consisting of coincident historical geochemical, airborne geophysical and satellite imagery anomalies. Ten areas of alteration of sedimentary strata have been identified, and although no significant geochemical results have been returned from them to date, they are considered of interest as possible distal alteration zones to mineralized areas.
The drillhole database used for the Feasibility Study contains 911 drillholes and 370,566 m of drilling. During 2007 and 2008, Canplats drilled 121 holes for 39,831 m of drilling, about 11% of the drilling by metres. This was 92 RC holes and 29 core holes. Between 2011 and 2015, Goldcorp drilled 779 holes for 328,587 m of drilling. These were 95 RC holes, 306 RAB holes, and 378 core holes. The 2015 holes and some of the late 2014 holes were drilled for geotechnical investigations. Orla drilling included in the Mineral Resource estimate was conducted during 2018 and consisted of 6 RC holes for 803 m of drilling and 5 core holes for 1,345 m of drilling, totalling 11 holes and 2,148 m of drilling. There was limited non-resource drilling completed by Orla in 2018, 2019, and 2020.
The 2021 Camino Rojo Report concludes that the drilling and sampling procedures for the Camino Rojo drill samples are reasonable and adequate and there do not appear to be any drilling, sampling, or recovery factors which would materially impact the accuracy and reliability of the results that are included in the database used for the Mineral Resource estimate or the Mineral Reserve estimate.
Analytical work comparing various drilling campaigns and drilling types indicates potential down hole contamination in some of the wet Canplats RC drilling. The suspect sample intervals were not used for the resource modeling for the 2021 Camino Rojo Report. This impacted about 2,100 m, or about 5%, of the Canplats drilling.
In addition to the 11 holes drilled by Orla used in the Mineral Resource model database, through the effective date of the 2021 Camino Rojo Report, Orla completed geotechnical, metallurgical, condemnation, regional exploration, sulphide zone exploration, and water exploration and development drilling totalling 21.8 km, as summarized in the table below.
Non-Resource Drilling Completed by Orla, 2018, 2019 and 2020
| | | | | | | |
|---|---|---|---|---|---|---|
| Purpose | Drillhole Type | Total Number of Holes | Total (m) | |||
| Clay Exploration | | DDH | | 5 | | 56.00 |
| Condemnation | | RC | | 7 | | 1,767.85 |
| Geotech Infrastructure Substrate | DDH | 19 | 323.35 | |||
| Geotech/Condemnation | DDH | 4 | 642.00 | |||
| Metallurgy | DDH | 14 | 2,288.50 | |||
| Infill/Sulphide Zone | DDH | 3 | 1,959.70 | |||
| Regional Exploration | RC | 26 | 7,748.50 | |||
| Monitoring Wells | RC/rotary | 11 | 916.51 | |||
| Water Exploration | RC | 16 | 5,340.51 | |||
| Water Production | RC/rotary | 2 | 715.60 |
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The clay exploration drilling indicated that clay required for leach pad and pond construction is present but was not able to confirm adequate amounts. The condemnation holes verified that the proposed sites for project infrastructure will not impede development of Mineral Resources. The geotechnical holes provided the information necessary to determine pit slope stabilities and design criteria for the process plant, leach pad, waste dumps, and ponds, and confirmed that the proposed locations for each are suitable. Metallurgical drillholes provided material for testing. The water exploration, monitoring, and development drilling provided information needed for hydrologic modeling and indicated that wells at the project site can provide an adequate water supply to the Camino Rojo Project.
Exploration Subsequent to the 2021 Camino Rojo Report
2021 Exploration
In addition to the Camino Rojo sulphide zone directional diamond drilling program (started in Q4 2020) that was completed in early April 2021 (4,119 metres drilled in 2021, of the 2020-21 program totaling 6,079m), the Camino Rojo regional exploration program continued in 2021 and included geophysical airborne (drone) magnetic survey (approximately 319 square km), RAB reconnaissance drilling as well as soil geochemical sampling and mechanical trenching. In addition, a geophysical IP (induced polarization) survey totaling 85.7 line-km has been completed. This target definition work led to the definition of exploration targets to the north-east and south-west of the Camino Rojo deposit as well as over an area located 3 km to the south.
2022 Exploration
Near-mine exploration continued in 2022 and consisted of directional diamond drilling at the Camino Rojo sulphide zone (9,174 m drilled) as well as conventional diamond drilling to test for near-pit oxide mineralization extension (3,093 m drilled). Drilling at the Camino Rojo sulphide zone has continued to confirm the continuity of wider, higher-grade (>2 g/t) gold mineralization and better defined the geological controls on gold mineralization. Near-pit oxide extension drilling has indicated potential for additional oxide material near the current ultimate pit boundaries.
Regional exploration also continued in 2022. The regional exploration program included geophysical airborne (drone) magnetic survey (approximately 271 square km), induced polarization survey (approximately 125 line-km), and RAB, RC, and diamond drill core drilling of priority exploration targets to the northeast and southwest of the Camino Rojo Oxide Mine deposit.
2023 Exploration
In 2023, Orla conducted near-mine exploration drilling, completing 2,500 meters of core drilling to validate oxide gold mineralization on the Fresnillo plc property that is subject to the Layback Agreement. This area is situated directly north of and adjacent to the Camino Rojo Oxide Mine open pit. Additionally, Orla executed 4,000 meters of drilling, focusing on extending oxide gold mineralization along key structures that control deeper levels of oxide mineralization, both within and beyond the existing design of the oxide open pit.
Orla also completed 35,070 meters of directional and conventional drilling to complete the infill drilling program of higher-grade parts of the Camino Rojo Sulphides deposit. Selected drillholes on the infill program were also extended to test potential extensions of sulphide mineralization below the currently defined Mineral Resource (referred to as the Camino Rojo Extension). Additionally, a separate drill section consisting of four drillholes (2,607 meter) was executed 450 metres down plunge of the existing resources. This drill section tested and confirmed the open extension of the mineralization into lower stratigraphic formations.
Regional exploration also continued in 2023. The regional program included drill testing exploration targets along the northwest-southeast mine trend and northwest-southeast mine trend. Target generation activities also continued, including geophysical airborne (drone) magnetic survey (approximately 207 square km) ground gravity survey (approximately 66 square km), soil geochemical survey, geological mapping and prospecting.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
See “Production, Outlook, and Future Plans” below for information on planned exploration activities subsequent to December 31, 2023.
SAMPLING, ANALYSIS, AND DATA VERIFICATION
Drilling and survey procedures observed are to acceptable industry standards, are appropriate to the deposits being drilled and are appropriate for Mineral Resource estimation.
Core and RC samples are commonly taken at one and half metre intervals. According to the current procedures, the core sample intervals take into consideration the boundaries between different material and rock types. All samples are immediately removed from the field upon drilling and core is marked up in the core shed in a secure facility located at the exploration camp. Drill core sampling intervals are defined then cut in half with a diamond saw along the core length. Samples are collected by an ALS Minerals truck and driven directly to the ALS sample preparation facility in Zacatecas.
All gold results at Camino Rojo were obtained by ALS Minerals (Au-AA23) using fire assay fusion and an atomic absorption spectroscopy finish. All samples are also analyzed for multi-elements, including silver, copper, lead and zinc using a four-acid digestion with ICP-AES finish (ME-ICP61) method at ALS Laboratories in Canada. If samples were returned with gold values in excess of 10 ppm or base metal values in excess of 1% by ICP analysis, samples are re-run with gold (Au-GRA21) by fire assay and gravimetric finish or base metal by (OG62) four acid overlimit methods.
Drill program design, Quality Assurance/Quality Control and interpretation of results were performed by qualified persons employing a Quality Assurance/Quality Control program consistent with NI 43-101 and industry best practices. Standards were inserted at a frequency of one in every 50 samples, and blanks were inserted at a frequency of one in every 50 samples for Quality Assurance/Quality Control purposes by the Company as well as the lab.
ALS Laboratories is independent of Orla. There are no known drilling, sampling, recovery, or other factors that could materially affect the accuracy or reliability of the drilling data at Camino Rojo.
MINERAL PROCESSING AND METALLURGICAL TESTING
Historical metallurgical test work programs on the Camino Rojo property were commissioned by the prior operators of the project between 2010 and 2015. A confirmatory metallurgical test program was commissioned by Orla in 2018 to confirm the results and conclusions from the previous campaigns. In total, 107 column leach tests (85 on representative samples for the material types and pit area) and 164 bottle roll tests had been completed to date the date of the 2021 Camino Rojo Report on the Camino Rojo ore body as well as physical characterization and preliminary flotation test work.
Based on the metallurgical tests completed on the Camino Rojo deposit, key recovery parameters (based on an 80 days leach cycle) include:
| ● | Estimated gold recoveries (including 2% field deduction) of: |
|---|---|
| ● | 70% for Kp Oxide; |
| --- | --- |
| ● | 56% for Ki Oxide; |
| --- | --- |
| ● | 60% for Trans-Hi; and |
| --- | --- |
| ● | 40% for Trans-Lo; |
| --- | --- |
| ● | Estimated silver recoveries (including 3% field deduction) of: |
| --- | --- |
| ● | 11% for Kp Oxide; |
| --- | --- |
| ● | 15% for Ki Oxide; |
| --- | --- |
| ● | 27% for Trans-Hi and |
| --- | --- |
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| ● | 34% for Trans-Lo. |
|---|
The key design parameters are based on a substantial number of metallurgical tests including 85 column leach tests on samples representative of domains in the current deposit model. These 85 representative samples from documented drill holes with good spatial distribution in the proposed pit include 41 columns tests on Kp Oxide material, 7 column tests on Ki Oxide material, 16 column tests on Trans-Hi material and 21 column tests on Trans-Lo material. The 22 non-representative columns were excluded based on materials not in the Mineral Reserves and samples outside pit area.
An additional 54 bottle roll leach tests with direct correlations with the column tests have been included as part of the evaluation to support these results and conclusions.
In general, the Camino Rojo deposit shows variability in gold and silver recoveries based on material type and geological domain with preg-robbing organic carbon being the only significant deleterious element identified, which is primarily associated with the transition material at depth along the outer edges of the deposit. Recoveries for the oxide material are good and will yield acceptable results using conventional heap leaching methods with cyanide. Recoveries for the transition material are lower compared with the oxide material for conventional leaching with some areas of transition showing reasonably high recoveries. Reagent consumptions for all material types are reasonably low.
Preg robbing, a phenomenon where gold and gold-cyanide complexes are preferentially absorbed by carbonaceous, and to a lesser extent, other material within the orebody, presents a low risk to the overall project. A significant investigation by Orla into the preg robbing material indicates that potentially preg robbing material represents a small percentage of the total material to be processed and will not be encountered until later in the project life and can be mitigated by proper ore control.
Since the start of operations in commercial production on April 1, 2022, site laboratory testing and external third-party laboratory tests are completed regularly to ensure the gold and silver recovery estimates, along with other processing parameters, are appropriately calibrated for production forecasting and Mineral Reserves.
MINERAL RESOURCE ESTIMATES
See “Summary of Mineral Reserve and Mineral Resource Estimates” above for the Mineral Resources estimate table.
The Mineral Resource estimate includes potential mill resources, which are sulphide dominant, and the potential heap leach resources, which are oxide dominant and were the emphasis of the 2021 Camino Rojo Report. The Mineral Resources are based on a block model developed by IMC during November 2023. This updated model incorporated recent Orla drilling program and updated geologic models.
The gold and silver Mineral Resource includes material amenable to heap leach recovery methods (leach material) and material amenable to mill and flotation concentration methods (mill material). The resources amenable to heap leach methods are oxide dominant and were the emphasis of the updated Feasibility Study.
The lead and zinc Mineral Resources are in sulphide dominant material and are recovered along with the gold and silver in the mill material.
The Mineral Resources from the leach material are reported inclusive of those Mineral Resources that were converted to Mineral Reserves. The Mineral Resources from the mill material were excluded from the mine design in the 2021 Camino Rojo Report and the current year-end 2023 Mineral Reserves estimate.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
There are certain risks associated with the Mineral Resource estimate that investors should be aware of. Please see “Risk Factors – The Camino Rojo Project Mineral Resource estimate assumes that the Company can access mineral titles and lands that are not controlled by the Company” and “Risk Factors – Mineral Resource estimations for the Camino Rojo Project are only estimates and rely on certain assumptions”.
Except as set out herein, neither the Company nor the authors of the 2021 Camino Rojo Report believe that there are significant risks to the Mineral Resource estimates based on environmental, permitting, legal, title, taxation, socio-economic, marketing, or political factors. The Camino Rojo Project is in a jurisdiction friendly to mining. The most significant risks to the Mineral Resource are related to economic parameters such as prices lower than forecast, recoveries lower than forecast, or costs higher than the current estimates.
The Mineral Resource estimate was prepared based on the Qualified Person’s reasoned judgment, in accordance with CIM Best Practices Guidelines and his professional standards of competence, that there is a reasonable expectation that all necessary permits, agreements and approvals will be obtained and maintained, including the additional agreement with Fresnillo to allow mining of waste material on its mineral concessions. In particular, when determining the prospects for eventual economic extraction, consideration was given to industry practice, and a timeframe of 10-15 years.
MINERAL RESERVE ESTIMATES
See “Summary of Mineral Reserve and Mineral Resource Estimates” above for the Mineral Reserves estimate table.
The effective date of the updated Mineral Reserve estimation is December 31, 2023. The Mineral Reserve estimation is based on an open pit mine plan and mine production schedule developed by Orla. Processing is based on crushing and heap leaching to recover gold and silver. The Mineral Reserve, relies on the Mineral Resources with an effective date of December 31, 2023, is based on a gold price of $1,500 per ounce and a silver price of $20.00 per ounce. Measured Mineral Resource in the mine production schedule was converted to Proven Mineral Reserve and Indicated Mineral Resource in the schedule was converted to Probable Mineral Reserve.
The Mineral Reserve estimate was calculated based on an NSR considering the gold and silver proportions with a block. The NSR cut-off is US$7.34 per tonne, which includes the processing, G&A, ore rehandle, and sustaining capital costs.
The Mineral Reserve estimate includes allowances for mining dilution and ore loss as compositing assays into composites and estimating blocks with multiple composites introduces some smoothing of model grades that are analogous to dilution and ore loss effects. Current pit surfaces and new cost assumptions were used in the dilution and ore loss comparison. The Company believes that reasonable amounts of dilution and loss were incorporated into the block model used for the Mineral Reserve estimate.
All of the mineralization comprised in the Mineral Reserve estimate with respect to the Camino Rojo Project is contained on mineral titles controlled by Orla. In the 2021 Camino Rojo technical report, all material to be mined on the Fresnillo mineral concession was considered waste, however, the current Mineral Reserves does not include such constraint as per the Layback Agreement. See “Mineral Projects – Camino Rojo – Project Description, Location, and Access” for additional information.
Approximately two-thirds of the Mineral Reserves are within the currently permitted mine plan. The remaining portion will require a CUS and related permit amendments for an expanded pit.
Orla does not believe that there are significant risks to the Mineral Reserve estimate based on metallurgical or infrastructure factors or environmental, permitting, legal, title, taxation, socio-economic, marketing, or political factors. There has been a significant amount of metallurgical testing and the infrastructure requirements are relatively straightforward compared to many operations. However, recoveries lower than forecast would result is loss of revenue for the project. There has also been some potential preg-robbing material identified in the deposit, as discussed in the 2021 Camino Rojo Report, but this does not appear to represent a significant risk.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
There is risk to the Mineral Reserve estimate based on mining factors. The slope angle assumptions are based on careful application of wall control blasting. Failure of the wall control blasting to perform as expected would result in less ore available for the process plant and potentially a shorter project life. Other risks to the Mineral Reserve estimate are related to economic parameters such as prices lower than forecast or costs higher than the current estimates. The impact of these is modeled in a sensitivity analysis on a regular basis.
MINING OPERATIONS
Camino Rojo open pit mining commenced in August 2021.
The Camino Rojo mine is a conventional open pit mine. Mine operations consist of drilling medium diameter blast holes (approximately 17 cm), blasting with either explosive slurries or ammonium nitrate/fuel oil (“ANFO”) depending on water conditions, and loading into large off-road trucks with hydraulic shovels and wheel loaders. Ore is delivered to the primary crusher and waste is delivered to the waste storage facility southeast of the pit.
Contract mining services is used at the Camino Rojo open pit and is currently provided by PEAL MÉXICO, S.A. DE C.V. The contractor’s loading units consists of 120 t class backhoe excavators and 130 t class wheel loader, while the main hauling truck fleet has a capacity of 100 t.
The mine plan is based on three mining phases. The phase 1 starter pit will target relatively high-grade Mineral Reserves in the central portion of the deposit. Phase 2 pushes the pit to final mining limits in the south and in a portion of the east and west side. The phase 3 final pit pushes walls to final positions in the north, east and west side. The mine plan was developed to supply ore to a conventional crushing and heap leach facility with the capacity to process 18,000 tonnes per day (“tpd”). There is also a low-grade stockpile facility to store marginal resource for processing at the end of commercial pit operations.
In 2023, the majority of the mining occurred in Phase 1 with some small amounts of stripping in Phase 2. The total material moved in 2023 was 11,598,551 tonnes with 7,436,960 of ore at an average gold grade of 0.75 g/t Au containing 179,083 ounces of gold.
PROCESSING AND RECOVERY OPERATIONS
Camino Rojo Project commenced operation in October 2021, followed by the stacking circuit in November 2021 and the Merrill-Crowe plant in December 2021. The first gold pour occurred on December 13, 2021 and commercial production was achieved effective April 1, 2022. Ore delivered from mine to the crushing circuit using haul trucks which will direct-dump into a dump hopper; front-end loaders will feed material to the dump hopper as needed from a run of mine (“ROM”) stockpile located near the primary crusher. The ore is crushed to a final product size of 80% passing 28mm (100% passing 38mm) using a two-stage closed crushing circuit. The crushing circuit will operate 7 days/week, 24 hours/day with an overall estimated availability of 75%.
The crushed product is stockpiled using a fixed stacker, reclaimed by belt feeders to a reclaim conveyor, and conveyed to the heap stacking system by an overland conveyor system. Pebble lime is added to the reclaim conveyor belt for pH control; agglomeration with cement is not needed.
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Stacked ore is leached using a drip irrigation system for solution application; sprinkler irrigation will be used after several years of operations to increase evaporation rates and avoid the need for water treatment from pit dewatering. After percolating through the ore, the gold and silver bearing pregnant leach solution will drain by gravity to a pregnant solution pond where it is collected and pumped to a Merrill-Crowe recovery plant. Pregnant solution is pumped through clarification filter presses to remove any suspended solids before being deaerated in a vacuum tower to remove oxygen. Ultra-fine zinc dust is added to the deaerated pregnant solution to precipitate gold and silver values, which is collected by precipitate filter presses. Barren leach solution leaving the precipitate filter presses flows to a barren solution tank and is then pumped to the heap for further leaching. High strength cyanide solution is injected into the barren solution to maintain the cyanide concentration in the leach solutions at the desired levels.
The precipitate from the Merrill-Crowe recovery plant is processed in the refinery. Precipitate is treated by an electric mercury retort with a fume collection system for drying and removal of mercury before being mixed with fluxes and smelted using an induction smelting furnace to produce the final doré product.
An event pond and pregnant solution pond are used to collect contact solution from storm or solution surge events if required. Solution collected will be returned to the process as soon as practical. Evaporators will be installed in the event pond after several years of operation, or as needed, to control excess solution generated by pit dewatering.
Camino Rojo is design for an annual process capacity of 6.57 million tonnes at a crushing rate of 18,000 tonnes per day.
The gold recoveries for oxide material ranges from 56% to 70% and transitional material ranges from 40% to 60%, with the overall gold recovery around 62%. The silver recoveries for oxide material ranges from 11% to 15% and transitional material ranges from 27% to 34%, with the overall silver recovery of 20%.
In 2023, Camino Rojo stacked 7,005,694 tonnes at an average gold grade of 0.79 g/t Au for a total of 121,877 oz gold produced.
INFRASTRUCTURE
Camino Rojo buildings are primarily prefabricated steel buildings or concrete masonry unit buildings and include an administration building, mine camp facilities, a Merrill-Crowe Process Facility, refinery, laboratory, process maintenance workshop, reagent storage building, mine truck shop, contractor mine office building, light duty truck shop, fuel stations, warehouse, explosives magazine, guard house, and medical clinic.
Power supply to the Camino Rojo Project is connected to the national grid at Concepción del Oro. Overhead powerlines connect 34.5 kV, three phase and 60 Hz power system, to a metering and switching substation located nearby. Power from the main substation is distributed at 34.5 kV. Emergency power generators supply electric power to critical process equipment, the mine camp, and the raw water pumping system. Internet and limited cellular communications are currently available, though these systems will be expanded for operations.
Total site water supply is sourced from production wells located within the property boundary. Total water consumption for 2023 averaged 23 liters per second (“L/s”) with a peak water demand of 37 L/s. Several production wells have been drilled between 2 km to 4 km from the raw water tank.
The project infrastructure includes a one km by 30 m air strip to allow for small passenger planes to land and take off at the project site. The air strip does not include any infrastructure or provisions for fueling or maintenance of planes or other aircraft.
The onsite operations camp consists of 112 rooms with a capacity of 176 persons.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Additional infrastructure for the Camino Rojo Project includes an-exploration office, core preparation, and storage facility located in San Tiburcio.
ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT
Baseline environmental studies required for mine permitting were commissioned by Orla in April 2018 and were completed in May 2019 by independent consultants.
A key objective of the Company is to design, build and operate the Camino Rojo Project in such a way that it does not cause significant adverse effects during construction, operation, closure, and post-closure. To aid this objective, a number of environmental management plans were developed prior to the start of construction. Reclamation will be undertaken during mining activities where possible, but the majority of work will occur after the completion of mining and final gold recovery. The reclamation land use objective will be to return the land to its traditional use as a grazing area for goats and wildlife habitat. Costs for concurrent reclamation and closure have been estimated at $28.6 million over the life of the project (in addition to $7.6 million for G&A costs during closure activities). These costs are in addition to any reclamation and closure costs considered in the normal operating and sustaining cost estimates.
Through the agreements established with the ejidos of San Tiburcio, El Berrendo, La Pardita, and San Francisco de los Quijano, the Company has committed to making fair payments for land leases, which have allowed the Company to continue its activities of exploration and mining without interruption. These agreements entail commitments to various forms of social support, including scholarships, upgrades to community infrastructure, initiatives for social and economic development, impact investments, as well as provisions of food and medicines to support the most vulnerable members of the community. The agreements follow procedures and frameworks determined by the Mexican Agrarian Law. Furthermore, the Company has instituted a community response mechanism to address and resolve community requests, concerns, and complaints. The Company also maintains a dedicated community relations team to ensure the effectiveness of its corporate social responsibility initiatives.
CAPITAL AND OPERATING COST
| | | | |
|---|---|---|---|
| Item | 2023 Actual | **** | 2024 Guidance |
| Sustaining Capital (m) | 9.4 | 18.0 | |
| Non-Sustaining Capital (m) | 11.4 | 13.0 | |
| All-In Sustaining Cost (/oz) | 736 | 875-975 |
All values are in US Dollars.
Camino Rojo’s sustaining capital expenditures during 2023 were $9.4 million, which included part of the construction of an ore stockpile dome cover for dust mitigation and other several small operational improvement activities.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
PRODUCTION, OUTLOOK, AND FUTURE PLANS
Production
Camino Rojo achieved first gold pour in December 2021 and commercial production was achieved effective April 1, 2022. The following table sets forth production at Camino Rojo since the first gold pour in December 2021. For additional information, see the heading “Discussion of Operations – Camino Rojo Operational Update” in the Company’s management’s discussion and analysis for the financial year ended December 31, 2023.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | Mined Grade^(1)^ | **** | | **** | Stacked Grade | | Gold Production |
| Year | **** | Ore Mined (t) | **** | (g/t) | **** | Ore Stacked (t) | **** | (g/t) | (oz) | |
| 2021 | 2,058,041 | 0.71 | 1,188,328 | 0.74 | 2,422 | |||||
| 2022 | 8,299,621 | 0.71 | 6,882,063 | 0.82 | 109,596 | |||||
| 2023 | 7,436,960 | 0.75 | 7,005,694 | 0.79 | 121,877 |
Note: (1) Includes low grade material that was stockpiled.
Production in 2024 will continue from the Phase 1 pit while pushing back to the next phases of the pit. Camino Rojo is expected to produce 110,000 oz to 120,000 oz at an AISC of between $875-975/oz. Sustaining capital expenditures is expected to increase from $9.4 million in 2023 to $18.0 million in 2024 and is primarily related to the heap leach pad expansion and new water well construction. Non-sustaining capital expenditures is expected to increase from $11.4 million in 2023 to $13.0 million in 2024, with the capitalized sulphide exploration drilling as the main contribution.
Planned 2024 Exploration
In 2024, Orla expects to continue both near-mine and regional exploration initiatives. Building upon the successes of 2023, near-mine exploration will focus on testing the potential for additional structurally controlled oxide mineralization southeast of the current pit extents in the near-surface. Furthermore, Orla intends to continue drill testing at depth for poly-metallic deposits located beneath the currently defined Mineral Resources. Regional exploration will extend into 2024, involving drill testing of priority exploration targets on the Camino Rojo property. Target generation work, consisting of geochemical and geophysical surveys, prospecting and mapping will also continue in 2024.
THE SOUTH RAILROAD PROJECT
The following disclosure relating to the South Railroad Project has been derived, in part, from the technical report entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” dated March 14, 2022, with an effective date of February 23, 2022 (the “South Railroad Report”), prepared by Matthew Sletten, PE, of M3 Engineering & Technology Corp. (“M3”), Benjamin Bermudez, PE, of M3; Art S. Ibrado, PE, of Fort Lowell Consulting PLLC; Michael S. Lindholm, CPG, of RESPEC; Thomas Dyer, PE, of RESPEC; Jordan Anderson, QP RM-SME, of RESPEC; Gary L. Simmons, QP-MMSA, of GL Simmons Consulting, LLC; Richard DeLong, QP-MMSA, RG, PGm of EM Strategies; and Kevin Lutes, PE, of NewFields Mining Design & Technical Services, each of whom is independent of the Company and a qualified person under NI 43-101.
The South Railroad Report was prepared for Gold Standard. Following the Company’s acquisition of Gold Standard, the Company filed the technical report under its profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Reference should be made to the full text of the South Railroad Report, as it contains additional assumptions, qualifications, references, reliances, and procedures that are not fully described herein.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
PROPERTY DESCRIPTION, LOCATION, AND ACCESS
The South Railroad Project is situated on the Railroad-Pinion property, which comprises two contiguous areas of mineral tenure held by the Company that straddle the Piñon Range in the Railroad mining district at the southeast end of the Carlin trend, a northwest-southeast trending belt of prolific gold endowment in northern Nevada. In previous technical reports, the northern portion of the land holdings, now referred to as the North Railroad portion of the property, has been referred to as the Railroad project and the Railroad property. The southern portion of the Railroad-Pinion property, now referred to as the South Railroad portion of the property, was referred to as the Pinion project and the Pinion property in previous technical reports. In November 2017, Gold Standard published a technical report on the Railroad-Pinion property, which included a Mineral Resource estimate for the North Bullion, POD, and Sweet Hollow gold deposits, located in the North Railroad portion of the Railroad-Pinion property, approximately 6 miles north of the Dark Star and Pinion deposits. Based on available information, North Bullion, POD, and Sweet Hollow would not likely share a common mining infrastructure with Dark Star and Pinion.
The Railroad-Pinion property in the Piñon Range is accessed primarily from the four-lane transcontinental U.S. Interstate 80 (“I-80”), approximately 275 miles west of Salt Lake City, Utah, and 290 miles east of Reno, Nevada. The project is located between 8 and 18 miles south of I-80 and can be reached by a series of paved and gravel roads from Elko, Nevada (population 18,300). The property is centered approximately at UTM NAD27 Zone 11 coordinates of 585,000E and 4,480,000N.
The North and South Railroad portions of the Railroad-Pinion property constitute a combined land position totaling 53,570 acres, and with partial interests taken into consideration, 50,600 acres net acres of land in Elko County, Nevada. The Company owns, or otherwise controls 100% of the subsurface mineral rights on a total of 29,942 acres of land held as patented and unpatented lode claims. This includes 1,455 unpatented claims owned by the Company and 207 unpatented claims held under lease. The Company also owns or leases 30 patented claims. There is also a total of 23,628 gross acres of private lands of which the Company’s ownership of the subsurface mineral rights varies from 49.2% to 100%, for a net position of approximately 20,658 gross acres.
Private surface and private mineral property are wholly owned and subject to lease agreement payments and property taxes (paid on an annual basis) as determined by Elko County. Unpatented lode mining claims grant the holder 100% of the locatable mineral rights and access to the surface for exploration activities which cause insignificant surface disturbance. Ownership of the unpatented mining claims is in the name of the holder (locator), subject to the paramount title of the United States of America, under the administration of the United States Bureau of Land Management (the “BLM”). Under the Mining Law of 1872, which governs the location of unpatented mining claims on federal lands, the locator has the right to explore, develop, and mine minerals on unpatented mining claims without payments of production royalties to the U.S. government, subject to the surface management regulation of the BLM. Currently, annual claim-maintenance fees are the only federal payments related to unpatented mining claims. The mineral rights do not expire if the unpatented claims are maintained by paying an annual fee of $165 per claim to the U.S. Department of Interior, BLM prior to the end of the business day on August 31 every year. A notice of intent to hold must also be filed with the Elko County Recorder on or before November 1 annually, along with a filing fee of $12.00 per claim, plus a $4.00 document fee.
The Company has completed its federal claim maintenance fee obligations for the owned and leased unpatented claims for the 2023-2024 assessment year. As of the date of this AIF, the Company’s estimated claim maintenance fee cost for 2024 for the owned and leased unpatented claims is $387,788, and the Company’s total estimated cost to maintain its property package for 2024 is $2,658,564.
Portions of the unpatented and private lands are encumbered with royalties predominantly in the form of standard Net (or Gross) Smelter Return (“NSR” or “GSR”) and Mineral Production (“MP”) royalty agreements, or Net Profit Interest (“NPI”) agreements, ranging from 1% to 5%. Additional details as well as the locations and aerial distribution of the currently relevant royalty encumbrances for the South Railroad Project are set forth in Section 4.2 of the South Railroad Report.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
As of the effective date of the South Railroad Report, the authors thereof were not aware of any significant factors or risks that may affect access, title, or the right or ability to perform work on the property. The Company controls sufficient ground and has sufficient permitting in place to access the project and continue future exploration programs. See “Environment and Permitting” below for additional information.
HISTORY
The Railroad–Pinion property is being explored on an ongoing basis by the Company using geological mapping, geochemical and geophysical surveying, and drilling. Exploration work by Gold Standard commenced in 2010 and resulted in the identification of 17 prospect areas or zones of mineralization within the property.
Twenty-one different historical operators are known to have drilled 1,084 holes, for a total of 500,544.1 ft, from 1969 through 2008. As of the database effective dates of the South Railroad Report, Gold Standard had drilled 1,121 holes for a total of 953,112 ft. At least 80% of all drilling used RC methods. However, the amount of RC drilling may be understated because the hole-types are not known for a substantial number of holes drilled in the late 1980s and 1990s, when RC drilling was common. See “Drilling” below for additional information on historic drilling.
Several historical Mineral Resource estimates have been estimated by a variety of companies for the Pinion, Dark Star, and POD deposits. These historical Mineral Resources are superseded by the current Mineral Resources presented under the heading “Summary of Mineral Reserves and Mineral Resources” above. See Section 6 of the South Railroad Report for additional information on historical estimates on the South Railroad Project.
The North Railroad portion of the property covers the historic Railroad district. Sources cited in the South Railroad Report suggested that historic production records for the district are not very reliable for the period between 1869 and 1905. Only the total volumes of tons mined, and commodity produced were reported, if they were reported. These sources estimated the total value of production through 1956 to be worth $2 million using the value of the commodity produced for the year it was produced. A reported 43,940 total tons of ore were mined with mineral production distributed as follows:
| ● | Gold - 6,918 ounces |
|---|---|
| ● | Silver - 382,000 ounces |
| --- | --- |
| ● | Copper - 2,850,000 pounds |
| --- | --- |
| ● | Lead - 4,340,000 pounds |
| --- | --- |
| ● | Zinc - 372,000 pounds |
| --- | --- |
There has been no mineral production reported for the South Railroad portion of the property.
See “Outlook and Future Plans” below for additional information on Gold Standard and the Company’s activities on the property after the date of the South Railroad Report.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
GEOLOGICAL SETTING, MINERALIZATION AND DEPOSIT TYPES
The South Railroad Project is located in the southern portion of the Carlin trend, centered on the Railroad dome in the Piñon Range, which is comprised of Ordovician through Permian marine sedimentary rocks. Eastern assemblage formations throughout the property include the Pogonip, Hanson Creek, Eureka Quartzite, Lone Mountain Dolomite, Oxyoke, Beacon Peak, Sentinel Mountain Dolomite, and Devils Gate Limestone and Tripon Pass formations. Siliceous clastic units include those of the Webb, Chainman, and Tonka formations. The north-south-striking Bullion fault corridor separates Tertiary volcanic rocks to the east from the Paleozoic sedimentary units in the range, which have been intruded by a complex of Eocene igneous rocks centered south of Bald Mountain, in the core and east flank of the range.
The gold-silver deposits within the South Railroad Project that are the focus of the South Railroad Report are considered to be Carlin-type, sedimentary-rock-hosted deposits. Precious metal mineralization is generally submicroscopic, disseminated, and hosted principally in sedimentary rocks, with some mineralization in felsic dikes and sills as well.
In the South Railroad portion of the property, the Dark Star Main and Dark Star North zones, which comprise the Dark Star deposit are hosted primarily within Pennsylvanian-Permian rocks, with minor amounts of gold mineralization found in the Chainman Formation and Tertiary conglomerates. The deposits are centered along the roughly north-south Dark Star fault corridor, within which is a horst block and associated silicified zone bounded by the West fault and Dark Star fault. Gold mineralization in the horst block is hosted in the middle, coarse-grained conglomeratic and bioclastic limestone-bearing unit of a Pennsylvanian-Permian undifferentiated sequence interpreted to be equivalent to the Tomera Formation. Mineralization dips steeply to the west near the surface at Dark Star Main and Dark Star North, but dips less steeply at depth at Dark Star Main.
Also, in the South Railroad portion of the property, the Pinion deposit is situated in a sequence of Paleozoic sedimentary rocks exposed within large horst blocks in which the sedimentary rocks have been broadly folded into a south- to southeastward-plunging, asymmetric anticline. The axis of this Pinion anticline trends approximately N50ºW to N60ºW and can be traced for approximately 2.0 mi (3.2 km). The limbs of the anticline dip shallowly at 10° to 25° to the west, and more steeply at 35° to 50° to the east. Disseminated gold and silver mineralization at the Pinion deposit is strongly controlled by a 10 ft to 400 ft-thick (3 m to 120 m-thick) dissolution-collapse breccia at the contact between calcarenite of the Devils Gate Limestone and the overlying silty micrite of the Tripon Pass Formation. Gold deposition was contemporaneous with breccia development, quartz veins formation, silica ± barite replacement, and infill of open spaces.
The Jasperoid Wash disseminated gold deposit, also located in the South Railroad portion of the property, is hosted by altered Tertiary feldspar porphyry dikes and their host Pennsylvanian-Permian conglomeratic rocks of a Tomera Formation equivalent. The deposit has approximate extents of 4,600 ft (1,400 m) to the north and a width of about 3,600 ft (1,100 m), and is partially contained within an elongate, north to south, steeply dipping structural corridor. Drilling shows the deposit dips steeply to the west nearby and within Tertiary dikes; east of the dikes, the deposit dips gently to the west. The gold is Inferred to be submicroscopic in grain size, however, petrographic studies have yet to be performed.
In the North Railroad portion of the property, disseminated gold mineralization has been defined by drilling in the North Bullion, POD, and Sweet Hollow zones. The mineralization is focused in the footwall of the Bullion fault zone. Faults appear to be important controls on mineralization. In general, gold-silver mineralization is localized in gently to moderately dipping, strongly sheared rocks of the Webb and Tripon Pass formations, in dissolution-collapse breccia developed above and within silty micrite of the Tripon Pass Formation, and calcarenite of the Devils Gate Limestone. The top of gold mineralization varies from 350 ft to 1,300 ft (105 m to 400 m) below the surface and varies in dip from 10° to 45° to the east. Gold is associated with “sooty” sulfide minerals, silica, carbon, clay, barite, realgar, and orpiment.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
EXPLORATION
The South Railroad Report summarizes exploration efforts by Gold Standard through to February 23, 2022, the date of the South Railroad Report. See “Outlook and Future Plans” below for information on exploration activities completed by Gold Standard and Orla subsequent to such date.
The Railroad–Pinion property was explored on an ongoing basis by Gold Standard using geological mapping, geochemical and geophysical surveying, and drilling. Prior to 2015, exploration activities by Gold Standard were focused in the North Railroad portion of the property. Work completed in 2015 was largely focused on the Pinion area in the South Railroad portion of the property, after its acquisition in 2014. A thorough discussion of these work programs and their results and interpretations is available in previous technical reports on the property.
Exploration work by Gold Standard since 2010 resulted in the identification of 17 prospect areas or zones of mineralization within the overall property position, including the Bald Mountain area and North Bullion deposits in the North Railroad-Pinion portion of the property, the Pinion, Dark Star, and Jasperoid Wash deposits, and other areas of the South Railroad portion of the property. Drilling conducted by Gold Standard is summarized below and in Section 10 of the South Railroad Report.
DRILLING
On October 4, 2021, MDA/RESPEC received a summary of all drilling conducted within the property during 2018 through 2021 from Gold Standard. This data was used to update the property-wide drilling information summarized in the 2020 technical report for the property (Ibrado et al. (2020)). In total, there are records from a total of 1,453,656 ft drilled in 2,205 holes since drilling commenced in 1969. These totals exclude two holes for which MDA/RESPEC has collar locations, but no depths drilled, hole type, company or assays. Twenty-one different historical operators are known to have drilled 1,084 holes, for a total of 500,544 ft, from 1969 through 2008. As of September 21, 2021, Gold Standard had drilled 1,121 holes for a total of 953,112 ft, as set forth in the table below. This includes 16 holes for 12,140 ft drilled in the Pinion area after the June 2, 2021 effective date of the Pinion resource database; five holes for 1,220 ft drilled in the Dark Star area after the June 15, 2021 effective date of the Dark Star resource database; and 38 holes for 12,409 ft drilled in the North Bullion area after the August 21, 2020 effective date of the North Bullion resource database. The drilling was done using Imperial units of measure.
Approximately 81% of the holes have records to indicate they were drilled with RC methods. There is a total of 33,357 ft drilled in 88 historical holes for which MDA/RESPEC had no reliable information on the type of hole or drilling methods used. The authors of the South Railroad Report believed the amount of RC drilling may be understated because the historical holes with no hole-type attribute were drilled in the late 1980s and 1990s when RC drilling was common.
All Railroad-Pinion Drilling 1969 – 2021
| | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | | **** | | **** | RC + | **** | RC + | **** | | **** | | **** | | **** | |
| | | Rotary | | Rotary | | | | | | Core Tail | | Core Tail | | Unknown | | Unknown | | | | |
| Period | | & RC Holes | | & RC (ft) | | Core Holes | | Core (ft) | | Holes | | (ft) | | Type Holes | | Type (ft) | | Total Holes | | Total (ft) |
| Historical Drilling 1969 - 2008 | | 938 | | 432,591 | | 58 | | 34,595 | | | | | | 88 | | 33,357 | | 1,084 | | 500,544 |
| Gold Standard 2010 - 2021 | | 847 | | 667,707 | | 233 | | 217,607 | | 41 | | 67,798 | | | | | | 1,121 | | 953,112 |
| Totals | **** | 1,785 | **** | 1,100,298 | **** | 291 | **** | 252,202 | **** | 41 | **** | 67,798 | **** | 88 | **** | 33,357 | **** | 2,205 | **** | 1,453,656 |
See Section 10 of the South Railroad Report for additional information on drilling conducted at the Railroad-Pinion property and “Outlook and Future Plans” below for information on drilling activities completed by Gold Standard and Orla subsequent to the effective date of the South Railroad Report.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
SAMPLING, ANALYSIS AND DATA VERIFICATION
Sampling and Analysis – North Railroad
Commencing in 2010, drilling company employees collected Gold Standard’s RC samples at the rig. Those samples were then picked up at the drill sites by representatives of ALS Minerals (“ALS”) or Inspectorate America Corporation (“Inspectorate”), a division of Bureau Veritas Mineral Laboratories USA (“Bureau Veritas”) and transported by truck to their respective laboratories in either Elko or Reno, Nevada (for ALS), or Elko (for Bureau Veritas). Excessively wet samples were kept at the drill sites for a few days to drain and dry prior to collection by the laboratory staff.
ALS and Bureau Veritas were commercial laboratories independent of Gold Standard. ALS is accredited through the International Organization for Standardization/International Electrotechnical Commission (“ISO/IEC”) 17025:2005 for specific analytical procedures, while most of their laboratories have attained ISO 9001:2008 certification. Bureau Veritas’ laboratories in Sparks, Nevada is accredited to the standard ISO/IEC 17025:2017, RG- MINERAL:2017. The Bureau Veritas laboratory in Vancouver, British Columbia is accredited to the standard ISO/IEC 17025:2005 and ISO 9001:2008.
Core samples were transported daily from the drill sites to Gold Standard’s logging and core-cutting facility in Elko by Gold Standard personnel. After logging and marking core-sample intervals by Gold Standard geologists, the core was photographed prior to being sawed lengthwise by contractor technicians. Whole HQ-size core was sawed in half. Whole PQ-size core was sawed in quarters. One half of the HQ core, and three quarters of the PQ core, were returned to the core boxes and the remainder was placed in pre-numbered sample bags that were closed with ties. Following insertion of QA/QC blanks and certified reference materials (“CRMs”), the core samples were transported by representatives of ALS or Bureau Veritas to their respective laboratories for preparation and analysis.
Samples from Gold Standard’s RC and core drilling at North Bullion in 2010 through 2014, and at Bald Mountain in 2014, were prepared at the ALS laboratories in Elko and Reno, Nevada. The samples were dried and crushed in their entirety to 70% at less than 0.079 in. The crushed samples were riffle-split to obtain 8.82 oz subsamples that were pulverized to 85% less than 75 microns. The pulps were shipped by air freight by ALS to the ALS laboratory in North Vancouver, British Columbia, for analysis. Gold was determined by 30 g fire-assay fusion with an AA finish (method code Au-AA23). Samples assayed at ≥0.292 oz Au/ton were re-analyzed with a second 30 g aliquot by fire-assay fusion and gravimetric finish (method code Au-GRA21). Separate aliquots of 0.5 g were analyzed for silver and 34 major, minor and trace elements by ICP following an aqua regia digestion. In some cases, the ICP analyses were conducted on pulps from 5.0 ft drill samples. In other cases, ICP analyses were conducted on composited pulps representing 20 ft drill intervals. Samples that assayed >292 oz/t for silver or zinc by ICP were re-analyzed using AA following aqua regia digestion of 0.1 g aliquots.
A minority of the 2010 through 2012 drill samples were analyzed by SGS Canada Inc. (“SGS”) of Vancouver, British Columbia. The assay certificates do not indicate how or where the samples were prepared for analysis. At the SGS laboratory in Burnaby, British Columbia, gold was determined by 30 g fire-assay fusion with an AA finish and separate aliquots were analyzed by ICP for 35 major, minor, and trace elements. SGS was a commercial laboratory independent of Gold Standard. MDA is not aware of certifications held by SGS at that time.
In 2013, pulps from previously prepared samples from North Bullion were analyzed by Bureau Veritas in Sparks, Nevada. Gold was determined by 30 g fire-assay fusion with an AA finish. Some of the samples were analyzed using a 30 g aliquot by fire-assay fusion and gravimetric finish. In 2014, some of the Bald Mountain drill sample pulps were re-analyzed at Bureau Veritas’ laboratory in Vancouver, British Columbia for copper by cyanide-H2SO4 leach. Other pulps were analyzed for 45 major, minor and trace elements by a combination of ICP and mass spectrometry (“ICP-MS”) after 4-acid digestion.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Samples from the 2015, 2016, and 2017 drilling at North Bullion and Bald Mountain were analyzed at ALS and Bureau Veritas. At ALS the methods and procedures of preparation were the same as those used in 2010 through 2014. Gold was determined using ALS method code Au-AA23 and Au-GRA21 principally in the ALS laboratory in North Vancouver. Most gold assays on 2017 North Bullion samples were performed in the ALS laboratory in Reno with the same methods (Au-AA23; Au-GRA21). Separate aliquots of 0.5 g were analyzed for silver and 34 major, minor and trace elements by ICP following an aqua regia digestion in the North Vancouver laboratory. In some cases, these were composited pulps representing 20 ft drill intervals.
A significant portion of the samples from the 2016 North Bullion drilling, and the majority of the 2017 North Bullion samples, were prepared and analyzed by Bureau Veritas. These samples were prepared in the Bureau Veritas laboratory in Elko. After crushing, a 8.0 oz riffle-split subsample was obtained from each drill sample. These subsamples were pulverized to 200-mesh size and the pulps were shipped to the Bureau Veritas laboratory in Sparks, Nevada. Gold was determined by fire-assay fusion of 30 g aliquots with an AA finish. The pulps were shipped via air freight by Bureau Veritas to their analytical laboratory in Vancouver where they were analyzed for 45 major, minor and trace elements by ICP-MS after four-acid digestion.
Samples from Gold Standard’s 2019 North Bullion drilling were analyzed at Bureau Veritas. At total of 40 major, minor and trace elements, including gold, were analyzed by ICP following an aqua regia digestion. The 2020 North Bullion drilling samples were analyzed at ALS for gold using a 30 g aliquot by fire-assay fusion followed by an AA finish.
Sampling and Analysis – South Railroad
Commencing in 2012, Gold Standard’s RC samples stored by the drill rig were collected at the drill sites by representatives of ALS or Bureau Veritas and transported via truck to their respective laboratories in Elko, Nevada. Excessively wet samples were kept at the drill sites for a few days to drain and dry prior to collection by the laboratory staff.
Core samples were transported daily from the drill sites to Gold Standard’s logging and core cutting facility in Elko by Gold Standard personnel. After logging and marking core-sample intervals by Gold Standard geologists, the core was photographed prior to being sawed lengthwise by contractor technicians. Whole HQ-size core was sawed in half. Whole PQ-size core was sawed in quarters. One half of the HQ core, and three quarters of the PQ core, were returned to the core boxes and the remainder was placed in pre-numbered sample bags that were closed with ties. Following insertion of QA/QC blanks and CRM, the core samples were transported by representatives of ALS or Bureau Veritas to their respective laboratories for preparation and analysis.
Samples from Gold Standard’s drilling in 2012, 2014, 2015, 2016, and 2017 were analyzed by ALS. The samples were prepared at the ALS laboratory in Elko, Nevada. The samples were dried and crushed in their entirety to 70% at less than 0.079 in. The crushed samples were riffle-split to obtain 8.0 oz subsamples that were pulverized to 85% at less than 75 microns. The pulps were shipped via air freight by ALS to the ALS laboratory in North Vancouver, British Columbia, for analysis. Gold was determined by 30 g fire-assay fusion with an AA finish (method code Au-AA23). Samples assayed at ≥0.292 oz/ton were re-analyzed with a second 30 g aliquot by fire-assay fusion and gravimetric finish (method code Au-GRA21). Separate aliquots of 0.5 g were analyzed for silver and 34 major, minor and trace elements by ICP following an aqua regia digestion. In some cases, the ICP analyses were conducted on pulps from 5.0 ft drill samples. In other cases, ICP analyses were conducted on composited pulps representing 20 ft drill intervals. Some samples in 2014 were analyzed for silver by fire-assay fusion of 30 g aliquots with a gravimetric finish. In 2014, some samples were also assayed for 48 major, minor and trace elements by ICP-MS after four-acid digestions. During 2017, samples were analyzed for gold by cyanide leach with an AA finish.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
In 2018, Pinion area drill samples were analyzed at Bureau Veritas and AAL. At the Bureau Veritas laboratory in Sparks, Nevada, samples were crushed in their entirety and riffle-split to obtain 8.0 oz subsamples. These subsamples were pulverized to 200-mesh size. Gold was determined by 30 g fire-assay fusion with an AA finish. Some samples were analyzed for gold by cyanide leach with an AA finish. The pulps were shipped to the Bureau Veritas laboratory in Vancouver, British Columbia. Carbon, CO2, and sulfur were determined by induction-furnace infrared absorption and thermal conductivity (“LECO”) analyses of 0.1 g aliquots. Gold, silver, and 35 major, minor and trace elements were assayed by ICP following aqua regia digestion of 0.5 g aliquots. Additional silver assays were completed in 2019 at Bureau Veritas using drill-sample pulps from previous analyses. Silver was determined by AA following four-acid digestion of 1.0 g aliquots.
At AAL in Sparks, Nevada, composited pulps of 2018 Pinion area drill samples were analyzed for gold by 30 g fire-assay fusion with an AA finish, and in some cases, with a gravimetric finish. Some of the samples were analyzed for gold by cyanide leach and an AA finish. Gold, silver, and 49 major, minor and trace elements were determined in some samples by ICP-MS following digestion in aqua regia.
AAL also analyzed selected, previously assayed drill-sample pulps for elemental barium using an energy-dispersive, x-ray fluorescence (“XRF-ED”) procedure. Pressed-powder pellets made from 2.0 g aliquots of sample pulps were used for the XRF-ED analyses, which were performed in 2018 and 2019. Other selected sample pulps were analyzed for barium using XRF-ED with 2.0 g pressed-powder pellets. Some of these were also analyzed for barite using wave-length dispersive x-ray fluorescence (“XRF-WD”) following lithium metaborate fusion of 0.5 g aliquots. Other sample pulps were analyzed for elemental barium by NITON hand-held XRF on both loose-powder aliquots. These were also analyzed by x-ray diffraction (“XRD”) for barite, witherite, and calcite, as well as sulfur and carbon by induction-furnace infrared (LECO).
Gold Standard also performed assays of elemental barium together with 39 major, minor, and trace elements using hand-held NITON XRF analyzers. These assays were done in 2018 in Elko, Nevada by independent contractor Rangefront Geological using selected drill-sample pulps in loose powder form.
In 2019, the Pinion drilling samples were analyzed at Bureau Veritas. Gold was determined by ICP following an aqua regia digestion and by cyanide leach followed by an AA finish. Silver was analyzed by AA following a 4-acid digestion and by ICP following an aqua regia digestion. Thirty-seven major, minor and trace elements were analyzed by ICP following an aqua regia digestion. Carbon species, sulfur species and CO2 were determined by LECO methods.
The 2020 drilling samples from Pinion were analyzed at Paragon Geochemical (“Paragon”). Paragon is an independent commercial analytical laboratory in Sparks, Nevada with ISO/IEC 17025 certification. Thirty-four major, minor and trace elements were analyzed by ICP following an aqua regia digestion. Some of the samples were analyzed by ICP following a 4-acid digestion. Silver was analyzed by AA and by ICP following a 4-acid digestion. Gold was determined using a 30 g fire-assay fusion with an ICP finish. Gold was also analyzed by cyanide leach of a 30 g aliquot with an AA finish.
In 2021, Pinion drilling samples were analyzed at AAL, Bureau Veritas and Paragon. The same methods of analysis used at each of these three laboratories in prior years were also used for the 2021 drilling samples. Gold Standard obtained XRF barium assays in-house using NITON and Olympus units, and through AAL and Paragon Laboratories.
Gold Standard’s 2015 drilling samples from the Dark Star area were mostly analyzed by Bureau Veritas after preparation in the Bureau Veritas laboratory in Elko, Nevada. The samples were crushed in their entirety and riffle-split to obtain 8.0 oz subsample. These subsamples were pulverized to 200-mesh size. Gold was determined by 30 g fire-assay fusion with an AA finish in Bureau Veritas’ laboratory in Sparks, Nevada. Composited pulps were analyzed in Bureau Veritas’ laboratory in Vancouver, British Columbia, for gold, silver and 35 major, minor and trace elements by ICP-MS following aqua regia digestion of 0.5 g aliquots. Some of the 2015 pulps were re-analyzed by ALS in in North Vancouver, British Columbia, for gold by 30 g fire-assay fusion with an AA finish.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The 2016 and 2017 drilling samples from the Dark Star area were analyzed in part by Bureau Veritas and in part by ALS, with sample preparation in their respective laboratories in Elko, Nevada, using the same procedures that were used for the Pinion area samples as summarized above. The ALS assays were carried out in their Reno and North Vancouver laboratories where gold was determined by 30 g fire-assay fusion with an AA finish. Samples with ≥0.292 oz Au/ton were re-analyzed with a second 30 g aliquot by fire-assay fusion and gravimetric finish. Silver and 34 major, minor, and trace elements were assayed by ICP following aqua regia digestion of 0.5 g aliquots.
The Bureau Veritas assays of the 2016 and 2017 Dark Star drilling samples were performed in Bureau Veritas’ laboratories in Sparks, Nevada, and Vancouver, British Columbia. Gold was determined by fire-assay fusion of 30 g aliquots with an AA finish and in some cases with a gravimetric finish. Some samples were analyzed for gold by cyanide leach and an AA finish, and some samples were analyzed for gold with a screen-fire assay procedure. Gold, silver, and 35 major, minor, and trace elements were assayed in the Vancouver laboratory by ICP-MS following aqua regia digestion of 0.5 g aliquots.
The 2018 and 2019 drilling samples from the Dark Star area were prepared in either Bureau Veritas’ Elko or Sparks, Nevada, laboratories and analyzed in their Sparks and Vancouver laboratories. Gold and multi-element assays were carried out with the same methods and procedures used for the 2016-2017 samples. In addition, some samples were analyzed for carbon species, sulfur species, and CO2 by LECO methods.
Bureau Veritas was the principal laboratory for the analysis of the 2020 and 2021 Dark Star drilling samples. Silver was analyzed by AA following a 4-acid digestion, as well as by ICP following an aqua regia digestion. Gold was determined using a 30 g fire-assay fusion with an AA finish. Gold was also analyzed using a 30 g cyanide leach with an AA finish. Thirty-seven major, minor and trace elements, including gold and silver, were analyzed by ICP following an aqua regia digestion. Carbon species, sulfur species and CO2 were determined with LECO methods.
ALS analyzed some of the 2020 Dark Star samples for gold using a 30 g fire-assay fusion with an AA finish, as well as a 30 g cyanide leach with an AA finish. Samples that assayed ≥0.292 oz Au/ton were re-analyzed with a second 30 g aliquot by fire-assay fusion and gravimetric finish.
AAL analyzed gold in some of the 2021 Dark Star drilling samples using a 30 g cyanide leach with an AA finish. Samples were also analyzed for gold using a 30 g fire-assay fusion followed by an ICP finish. Samples that assayed ≥0.292 oz Au/ton were re-analyzed with a second 30 g aliquot by fire-assay fusion and gravimetric finish.
The 2017 drilling samples from the Jasperoid Wash area were analyzed in part by Bureau Veritas and in part by ALS following preparation at their respective laboratories in Elko, Nevada. Gold and multi-element analyses were performed at their respective laboratories in Sparks, Nevada, Vancouver and North Vancouver, British Columbia, using the same methods and procedures used for the 2016-2018 Dark Star samples as summarized above.
All of the 2018 drill samples from Jasperoid Wash were prepared and analyzed by Bureau Veritas in Sparks, Nevada and Vancouver, British Columbia, using the same methods and procedures used for the 2016-2019 Dark Star samples as summarized above.
The 2019 drill samples from Jasperoid Wash were analyzed at Bureau Veritas. Thirty-seven major, minor and trace element, including gold and silver, were analyzed by ICP following an aqua regia digestion. Gold was also analyzed by cyanide leach. Carbon species, sulfur species and CO2 were determined with LECO methods. In 2020, some of the earlier Jasperoid Wash drilling samples were analyzed for silver using AA following a 4-acid digestion.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Gold Standard’s 2017 and 2018 drilling samples from the Dixie area were prepared by Bureau Veritas in Sparks, Nevada and Elko, Nevada. Analyses were conducted in the Bureau Veritas Sparks and Vancouver laboratories. Gold was determined by fire-assay fusion of 30 g aliquots with an AA finish. Some samples were analyzed for gold by cyanide leach and an AA finish. Gold, silver and 35 major, minor and trace elements were assayed in the Vancouver laboratory by ICP-MS following aqua regia digestion of 0.5 g aliquots. Composited pulps from the 2018 drilling were analyzed for carbon species, sulfur species and CO2 by LECO methods in the Vancouver laboratory.
Most RC samples from Gold Standard’s 2018 drilling at the Ski Track area were prepared by Bureau Veritas in Sparks, Nevada and Elko, Nevada. Analyses were conducted in the Bureau Veritas Sparks and Vancouver laboratories. Gold was determined by fire-assay fusion of 30 g aliquots with an AA finish. Some samples were analyzed for gold by cyanide leach and an AA finish. Gold, silver, and 35 major, minor and trace elements were assayed in the Vancouver laboratory by ICP-MS following aqua regia digestion of 0.5 g aliquots. Composited pulps from the 2018 drilling were analyzed for carbon species, sulfur species, and CO2 by LECO methods in the Vancouver laboratory.
For additional information on the specific assaying and analytical procedures used by historic operators of the property prior to Gold Standard, see Section 11 of the South Railroad Report.
Data Verification
Mr. Lindholm is satisfied that the Pinion, Dark Star, Jasperoid Wash, and North Bullion drilling databases are in good condition. Various audits and checks were performed by MDA to verify collar coordinates, down-hole deviation surveys, geology, and assay data in the drill-hole database. All Gold Standard gold assay data was verified using digital laboratory certificates. However, about one third of the Pinion assays and one quarter of the Dark Star assays from historical drill campaigns were unsupported with original assay certificates. The same is true at North Bullion, where Gold Standard drilling makes up only 28% of the database, almost all of which is in the North Bullion deposit. The drill-hole data at the POD, Sweet Hollow and South Lodes deposits is almost entirely historical. Drill-hole data lacking adequate supporting documentation, as well as data from holes observed during sectional modeling to be inconsistent with surrounding holes, were treated as lower confidence, or excluded from use in modeling and estimation.
In 2019, Gold Standard supplemented their Pinion silver database with re-assayed individual samples for which composites of multiple intervals had previously been analyzed. Over 50% of the original certificates were available for all silver data and were used for verification. QA/QC data was also evaluated, and the silver data was deemed acceptable for use in estimation of classified Mineral Resources.
There is no evidence of significant historical QA/QC programs for drilling prior to 2014. For Gold Standard programs at Dark Star, Pinion, and Jasperoid Wash, the QA/QC program was minimal in 2014 through 2016 but was more comprehensive in 2017 to 2020. Similarly at North Bullion, over the full-time span of the Gold Standard drilling from 2010 to 2012 there is a reasonable implementation of QA/QC protocols, but during some periods of time it is less substantial. The results and amount of QA/QC data, as well as non-remedied QA/QC “failures,” were considered in Mineral Resource classification for the Dark Star, Pinion, Jasperoid Wash and North Bullion deposits. Mr. Lindholm concludes that the Dark Star, Pinion, and Jasperoid Wash analytical data are adequate for the purposes used in the South Railroad Report, subject to issues described in Section 12 of the South Railroad Report. The issues described in Section 12 of the South Railroad Report were considered in assigning levels of confidence and the classification of the Mineral Resources.
Cyanide-soluble gold assays at Dark Star and Pinion were verified, but no QA/QC data was available for evaluation. Carbon and sulfur species data were audited and determined to be adequate for use in their respective estimates done for waste handling and metallurgical characterization. No QA/QC data was associated with the carbon and sulfur analyses.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Barium was estimated in the Pinion deposit block model for metallurgical characterization. Barium analyses were done using pressed-powder energy-dispersive XRF-ED and loose-powder NITON XRF analytical methods. These methods were evaluated by running additional analyses on duplicate pulp samples by various methods. After evaluating the reliability and relationship of barium assays produced by the two methods, and verification of the data, the data was used to model and estimate NITON XRF-derived barium grades.
MINERAL PROCESSING AND METALLURGICAL TESTING
The current study of the South Railroad portion of the Railroad-Pinion project focuses on two main sources of ore, for which Mineral Reserves are declared: the Pinion and Dark Star deposits. These deposits have different geo-metallurgical characteristics, which are briefly summarized as follows:
| ● | The Pinion deposit can be characterized as hard and abrasive material, with a steep feed P80 vs. gold recovery response. Much of the gold is contained in the rock ground mass and requires fine crushing (-1/4” inch) to liberate gold for the most efficient cyanide-leach extraction. Gold recovery has proven to be sensitive to high barite/silica content in the mulilithic breccia (mlbx) ore type. Gold recovery from the high-barite/silica materials benefits the most from fine crushing. This deposit can be heap leached without crushing, at low gold recovery, conventionally crushed and leached at modestly higher gold recovery, or HPGR-crushed at higher gold recovery. |
|---|---|
| ● | The Dark Star deposit can be characterized as hard and moderately abrasive material, with a flat feed P80 vs. gold recovery response. Most of the gold is contained in fractures that have been oxidized and accessible to cyanide solutions that easily pass through the rock matrix. Consequently, high gold extractions are achieved at coarse particle size, requiring no crushing prior to heap leaching. |
| --- | --- |
A large number of variability and master composites (mostly from PQ core) were selected by Gold Standard for feasibility level testing on the Dark Star and Pinion Deposits. Standard metallurgical testing protocols consisted of bottle roll leach testing at 80 percent passing (P80) size targets of 75 microns (200 mesh) and 1,700 microns (10 mesh), and column leaching testing at various P80 sizes ranging from 0.375 inch to 1.0 inch (9.5 mm to 25 mm). Additional composites were crushed using High Pressure Grinding Rolls (HPGR), at medium press force, and subjected to column leaching. The total number of metallurgical tests, by deposit, is presented in the table below.
Summary of Leach Tests Performed
| | | | | |
|---|---|---|---|---|
| | | Number of Tests | ||
| Test Procedure | **** | Dark Star | **** | Pinion |
| Bottle Roll P80 Target = 75 microns (200 mesh) | 121 | 195 | ||
| Bottle Roll P80 Target = 1,700 microns (10 mesh) | 121 | 207 | ||
| Conv. Crush Columns P80 Target = 0.375-1.0 inch (9.5-25 mm) | 99 | 90 | ||
| HPGR Crush Columns P80 Target = 0.20-0.24 inch (5-6 mm) | 11 | 23 |
ROM heap leach head grade vs. gold recovery models were developed for Dark Star and Pinion and silver recovery models were developed for Pinion. Silver recovery was not modelled for Dark Star as silver grades are too low to be of economic significance.
Due to the multiple material types, and the dependence of gold recoveries on head grades and crush size, 71 gold and silver recovery vs head grade equations were developed, along with recovery vs solution-to-ore ratio equations. Of the recovery equations, 28 are for Pinion oxide and transition ROM ores and 16 are for Dark Star oxide and transition ROM ores. The recovery equations can be found in Section 13 of the South Railroad Report.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The gold and silver recovery equations for each ore type were delivered to the mine modelers for incorporation into the block calculations.
The overall life-of-mine ROM average gold recovery for the Dark Star deposit is estimated at 71.9 percent and the Pinion deposit is estimated at 56.3 percent.
The major reagent consumptions for heap leaching of Pinion and Dark Star ore have been taken from available metallurgical test results from column leach tests on crushed material. No test data exists at the ROM particle size, so the selected reagent consumptions have been estimated based on test results on the coarsest samples tests 1.5 inch (37 mm). Cyanide consumptions have been estimated at 0.44 lb/ton (0.22 kg/tonne) for Pinion and 0.46 lb/ton (0.23 kg/tonne) for Dark Star. Lime consumption is estimated at 2.0 lb/ton (1.0 kg/tonne) for both Pinion and Dark Star ores.
The process selected for recovery of gold and silver from the Pinion and Dark Star ore is a conventional ROM heap leach. Oxide and transition ore types will be mined by standard open pit mining methods from two separate pits. The ore will be truck-stacked on the heap as ROM ore directly, without crushing, in 30-foot lifts. Lime will be added directly to the haul trucks for pH control.
The stacking rate will be in accordance with the mine plan. The ROM ore placement is equivalent to a LOM average of 22,000 tonnes per day, with the peak in Year 5 of an average of 29,700 tonnes per day.
Gold and silver in the stacked ore will be leached with a dilute cyanide solution using a drip irrigation system at application rates in the range of 4,800-6,100 gallons per minute. The leached gold and silver will be recovered from solution using a carbon adsorption circuit. The gold and silver will be stripped from carbon using a desorption process, followed by electrowinning to produce a precipitate sludge. The precipitate sludge will be processed using a retort oven for drying and mercury recovery, and then refined in a melting furnace to produce gold and silver doré bars.
MINERAL RESOURCE ESTIMATE
See “Summary of Mineral Reserve and Mineral Resource Estimates” above for the Company’s current Mineral Resource estimates for the South Railroad Project.
The estimated Mineral Resources presented were classified in order of increasing geological and quantitative confidence into Inferred, Indicated, and Measured categories to be in accordance with the CIM Standards. Mineral Resources are reported at cutoffs that are reasonable for deposits of this nature given anticipated mining methods and plant processing costs, while also considering economic conditions, because of the regulatory requirements that a Mineral Resource exists “in such form and quantity and of such a grade or quality that it has reasonable prospects for eventual economic extraction.”
MDA modeled geology and metal domains for the Dark Star, Pinion, and Jasperoid Wash deposits, then estimated and classified gold Mineral Resources. A silver estimate was also produced for the Pinion deposit. Gold Standard provided the geologic modeling for the various deposits and were intimately involved with metal domain modeling. Block sizes were 30 ft x 30 ft x 30 ft for Dark Star and Pinion, and 20 ft x 20 ft x 20 ft for Jasperoid Wash. The block size for modeling and estimation at the North Bullion deposits model was 10 ft x 10 ft x 10 ft for evaluation of underground potential, but reblocked to 30 ft x 30 ft x 30 ft to optimize open pits. Estimation was done using inverse-distance methods with powers ranging from two to four. Multiple models were estimated in order to optimize the estimation parameters.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The estimate of Mineral Resources for the Railroad-Pinion property is the block-diluted inverse-distance estimate and is reported at variable cutoffs for open-pit and underground mining. The cutoff for oxidized and transitional redox material in an open pit is 0.005 oz Au/ton (0.171 g Au/t), whereas the cutoff for sulfide material is 0.045 oz Au/ton (1.543 g Au/t). Potential sulfide underground resources, present only at the North Bullion deposit, are reported at a cutoff of 0.100 oz Au/ton (3.429 g Au/t). Mineral Resources were classified as Measured, Indicated or Inferred for each deposit separately. Factors considered for classification include results of data verification and QA/QC results, the level of geologic understanding of each deposit, and performance of past Mineral Resource block models with new drilling.
The Mineral Resources set forth under the heading “Summary of Mineral Reserve and Mineral Resource Estimates” present the optimized pit- and underground grade shell-constrained estimated Mineral Resources for the Dark Star, Pinion, Jasperoid Wash, and North Bullion deposits based on a $1,750/oz gold price.
Barium was estimated into the Pinion deposit block model for use in metallurgical characterization of the Pinion mineralized material. The average barium grade is ~2.25% for the gold mineralization grading at least 0.005 oz Au/ton (0.171 g Au/t). Factoring between barium analytical results were required, which added some uncertainty to the model.
Cyanide-soluble gold block models were produced for the Pinion and Dark Star deposits. These estimates appear reasonable in areas with Gold Standard drilling, however, there is less confidence in some areas where cyanide-soluble gold data is lacking, such as where historical drilling is predominant.
An acid-base accounting model was generated for Pinion and Dark Star to characterize waste material for mine planning and handling. An organic carbon model was also produced to evaluate effects on metallurgy at Pinion. Because of limited data, these estimates can only be considered as guides for environmental planning and metallurgy.
MINERAL RESERVE ESTIMATE
See “Summary of Mineral Reserve and Mineral Resource Estimates” above for the Company’s current Mineral Reserve estimates for the South Railroad Project.
Measured and Indicated Mineral Resources were used as the basis to define Mineral Reserves for both the Dark Star and Pinion deposits. Mineral Reserve definition was done by first identifying ultimate pit limits using economic parameters and applying pit optimization techniques. The resulting optimized pit shells were then used for guidance in pit design to allow access for equipment and personnel. Modifying factors including mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social, and governmental factors have been applied in the estimate of Mineral Reserves.
RESPEC provided the final production schedule to M3 who developed the final cash-flow model which demonstrates that the Pinion and Dark Star deposits make a positive cash flow and are reasonable with respect to statement of Mineral Reserves for these deposits. Within the designed pits there are a total of 267.2 million tonnes of waste associated with the in-pit Mineral Reserves. This results in an overall project strip ratio of 4.1 tonnes of waste for each ton of material processed.
MINING OPERATIONS
The Feasibility Study for the South Railroad Project includes mining at both the Dark Star and Pinion deposits; both are planned as open-pit, truck and shovel operations. The truck and shovel method provides reasonable costs and selectivity for these deposits.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The production schedule considers the processing of material by ROM. All ROM material will be dumped in place directly on the ROM leach pad. Monthly periods were used to create the production schedule with pre-stripping starting in Dark Star at month -6. Start of ROM processing is assumed to be month 2.
The total Dark Star mining rate would ramp up from 18,000 tonnes per day to about 73,000 tonnes per day over a period of six months. A maximum of 99,000 tonnes per day is used in the production schedule during the peak mining of deeper Dark Star material. Pre-production mining is planned to start in Dark Star North and then progress to Pinion in Year 1. The maximum mining rate required in Pinion is 114,000 tonnes per day.
The Feasibility Study has assumed owner mining to keep the cost lower than it would be with contract mining. The production schedule was used along with additional efficiency factors, cycle times, and productivity rates to develop the first principle hours required for primary mining equipment to achieve the production schedule. Primary mining equipment includes drills, loaders, hydraulic shovels, and 181-tonne capacity haul trucks.
Waste storage facility designs were created for the Feasibility Study to contain the material that is not processed. A 1.3 swell factor was assumed which provides for both swell when mined and re-compaction when placed into the facility.
PROCESSING AND RECOVERY OPERATIONS
The process selected for recovery of gold and silver from the Pinion and Dark Star ore is a conventional heap-leach recovery circuit. The ore will be mined by standard open pit mining methods from two separate pits. Pinion and Dark Star ore will be truck-stacked on the heap as ROM ore directly, without crushing.
Oxide and transition material types will be leached with a dilute cyanide solution. The leached gold and silver will be recovered from solution using a carbon adsorption circuit. Gold and silver will be stripped from carbon using a desorption process, followed by electrowinning to produce a precipitate sludge. The precipitate sludge will be processed using a retort oven for drying and mercury separation and recovery, and then refined in a melting furnace to produce gold and silver doré bars.
The Pinion and Dark Star deposits have a total estimated Mineral Reserve of 65.2 million tonnes. The total estimated mine life is 8 years; solution application on the heap leach pad will continue for an additional 2.5 years after mining operations have ceased to recover additional solubilized metal ounces. The nominal ore placement rate on the pad is an average of 8 million tonnes per annum, equivalent to 22,000 tonnes per day.
The gold and silver recoveries for heap leaching of the Pinion and Dark Star ore have been taken from the recommendations detailed in Section 13 of the South Railroad Report, as discussed above under “Mineral Processing and Metallurgical Testing”. For the Pinion and Dark Star Mineral Resources, the overall life-of-mine average gold recovery for the ore is estimated at 64.5 percent. For the Pinion and Dark Star Mineral Resources, the overall life-of-mine average silver recovery for the ore is estimated at 11 percent.
INFRASTRUCTURE, PERMITTING AND COMPLIANCE ACTIVITIES
Infrastructure
Project infrastructure for South Railroad has been developed to support the mining and heap leaching operations. Electrical power will be generated onsite by generators powered by liquified natural gas (LNG). Project buildings located at the site will include Security and Emergency services, Administration, Change House, Crushing, Truck Shop, ADR/Refinery Plant, and Laboratory buildings. These will mainly be located between Pinion and Dark Star pits for ease of access and be connected by local roads and haul routes.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Environment and Permitting
Gold Standard conducted environmental baseline studies over the past several years as part of their ongoing permitting efforts and in preparation for the submittal of permit applications for conduct mining operations. The main portion for the project area has been surveyed for surface water resources, including Waters of the United States (“WOTUS”), biological resources, and cultural resources. The project access road, and the water management area remain to be surveyed. In 2018, Gold Standard commenced material characterization testing of the mineralized material and waste rock to determine the metal leaching and acid generation potential. Additionally, an evaluation of the groundwater resources was commenced to determine groundwater supply potential, as well as the potential impacts from groundwater pumping and pit lake development. Gold Standard has had several meetings with BLM since January 2019 to determine any additional baseline data collection needs for the permitting process.
Within and adjacent to the project area there are greater sage grouse and golden eagles. These species will have an effect on how the project is permitted and what mitigation in required or proposed. The Company is working with the BLM on the management of these species.
The review and approval process for the Plan Application by the BLM constitutes a federal action under the National Environmental Policy Act (“NEPA”) and BLM regulations. Thus, for the BLM to process the Plan Application the BLM is required to comply with the NEPA and prepare either an Environmental Assessment (“EA”), or an Environmental Impact Statement (“EIS”). The BLM has determined that this process requires an EIS, due to the mine dewatering and potential pit lake. The Company will also need an Individual Section 404 Permit from the United States Army Corps of Engineers, and this agency will be a cooperating agency on the NEPA documents.
As of the date of this AIF, the Notice of Intent is with the BLM for review. The Company expects the Notice of Intent to be filed in the Federal Register in 2024.
There are a number of environmental permits issued by the Nevada Department of Environmental Protection (“NDEP”) that are necessary to develop the project and which the Company needs to permit the project. The NDEP issues permits that address water and air pollution, as well as land reclamation. The Nevada Division of Water Resources (“NDWR”) issues water rights for the use and management of water.
South Railroad is a previously explored mineral property with exploration related disturbance. However, there have been very long periods of non-operation. There are no known ongoing environmental issues with any of the regulatory agencies. Gold Standard conducted baseline data collection for a couple of years for environmental studies required to support the Plan Application and permitting process. The waste and mineralized material characterization and the hydrogeologic evaluation are currently in their latter stages of development. Material characterization indicates the need to manage a significant portion of the waste rock as potentially acid generating in engineered facilities. Additional results to date indicate limited cultural issues, air quality impacts appear to be within State of Nevada standards, traffic and noise issues are present but at low levels, and socioeconomic impacts are positive.
Social and community impacts have been and are being considered and evaluated for the Plan Amendment and Plan Application performed for the project in accordance with the NEPA and other federal laws. Potentially affected Native American tribes, tribal organizations, and/or individuals are consulted during the preparation of all plan amendments to advise on the proposed projects that may have an effect on cultural sites, resources, and traditional activities.
Potential community impacts to existing population and demographics, income, employment, economy, public finance, housing, community facilities, and community services are evaluated for potential impacts as part of the NEPA process. There are no known social or community issues that would have a material impact on the project’s ability to extract Mineral Resources. Identified socioeconomic issues (employment, payroll, services and supply purchases, and state and local tax payments) are anticipated to be positive.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
A Tentative Plan for Permanent Closure (“TPPC”) for the project would be submitted to the NEDP with the Water Pollution Control Permit application. In the TPPC, the proposed heap leach closure approach would consist of fluid management through evaporation, covering the heap leach pad and waste rock facilities with growth media, and then revegetating. The design of the process components is not sufficiently advanced to determine the closure costs. Any residual heap leach or waste rock facilities drainage will be managed with evaporation cells.
Gold Standard developed a Water Management Plan for South Railroad in support of the Feasibility Study. The Water Management Plan formed the basis for evaluating the infrastructure and associated cost to manage water through the life cycle of the mine. The purpose of the Water Management Plan is to present the water management strategies that focus on water as an asset and allow the Company to proactively plan and manage water from development to post-closure such that operational and stakeholder water needs are met, and that human health and the environment are protected.
CAPITAL AND OPERATING COSTS
The capital expenditure schedule for the LOM as set forth in the South Railroad Report is shown in the table below.
Capital Expenditure Schedule
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Initial | | Sustaining | | Total | ||||||||||||||||||||||||||||||
| Capital Expenditure (000) | Year -1 | **** | Year 1 | **** | Year 2 | **** | Year 3 | **** | Year 4 | **** | Year 5 | **** | Year 6 | **** | Year 7 | **** | Year 8 | **** | Year 9 | **** | Year 10 | **** | | ||||||||||||
| Mine Pre-Prod. | $ | 22,640 | | — | | — | | — | | — | | — | | — | | — | | — | | — | | — | | $ | 22,640 | ||||||||||
| Mine Capital | $ | 13,943 | | $ | 10,703 | | $ | 16,798 | | $ | 16,306 | | $ | 16,914 | | $ | 16,284 | | $ | 10,884 | | $ | 9,147 | | $ | 5,588 | | — | | — | | $ | 116,568 | ||
| Process | $ | 152,458 | | $ | 27,169 | | $ | 8,953 | | $ | 15,149 | | $ | 6,798 | | $ | 13,850 | | $ | 5,375 | | $ | 2,563 | | $ | 1,329 | | $ | 1,223 | | $ | 1,644 | | $ | 236,511 |
| Owner’s Cost | $ | 1,157 | | — | | **** | — | | **** | — | | **** | — | | **** | — | | **** | — | | **** | — | | **** | — | | **** | — | | **** | — | | $ | 1,157 | |
| Total | $ | 190,197 | | $ | 37,872 | | $ | 25,751 | | $ | 31,455 | | $ | 23,712 | | $ | 30,133 | | $ | 16,259 | | $ | 11,710 | | $ | 6,918 | | $ | 1,223 | | $ | 1,644 | | $ | 376,873 |
All values are in US Dollars.
The total production cost includes mine operations, process plant operations, general and administration, reclamation and closure, and government fees. The following table below shows the operating costs as set forth in the South Railroad Report over the LOM by area.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
LOM Operating Costs
| | | |
|---|---|---|
| LOM Operating Cost (000) | ||
| Mining | $ | 616,504 |
| Process Plant | $ | 147,424 |
| G&A | $ | 37,750 |
| Refining | $ | 5,153 |
| Total Operating Cost | $ | 806,832 |
| Royalty | $ | 10,911 |
| Salvage Value | $ | (12,410) |
| Reclamation/Closure | $ | 22,569 |
| Total Production Cost | $ | 827,901 |
All values are in US Dollars.
The Feasibility Study indicates an average gold production over the estimated 8-year LOM of about 124,000 ounces per year, with peak production in Year 2 of 197,000 ounces of gold. Cash costs are estimated to be $792 per ounce of gold after by-product credit, and AISC is estimated to be $1,021 per ounce of gold^2^. The resulting after-tax cash flow is $403.2 million, for an after-tax NPV (5%) of $314.8 million and an estimated payback period of 1.9 years. A summary of the pre-tax and after-tax Feasibility Study economic indicators is shown in the following table.
2 Note: Total cash cost and AISC are non-GAAP measures. See “Introductory Notes and Cautionary Statements – Non-GAAP Measures” for additional information.
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Economic Analysis Summary
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| Indicators | **** | Before-Tax | **** | After-Tax | **** | ||
| LOM Cash Flow ($000) | | $ | 497,330 | | $ | 403,162 | |
| NPV @ 5% ($000) | | $ | 388,866 | | $ | 314,791 | |
| NPV @ 10% ($000) | | $ | 307,248 | | $ | 247,592 | |
| IRR | | 49.2 | % | 44.3 | % | ||
| Payback (years) | | 1.9 | | 1.93 | |
Sensitivity Analysis
The following table shows the sensitivity analysis of the key economic indicators (cash flow, NPV, IRR, and payback) to changes in gold prices.
Sensitivity Analysis
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial Indicators | Spot Case | Base +150 | **** | Base Case | Base -150 | Base -250 | |||||||||
| Gold Price (per troy oz) | | $ | 1,899 | | | $ | 1,650 | | $ | 1,500 | | $ | 1,400 | | |
| Silver Price (per troy oz) | | $ | 21.50 | | | $ | 21.50 | | $ | 21.50 | | $ | 21.50 | | |
| Pre-tax Cash Flow, $M | | $ | 753.9 | | | $ | 497.3 | | $ | 342.8 | | $ | 239.8 | | |
| Pre-tax Net Present Value (5%) in $M | | $ | 603.0 | | | $ | 388.9 | | $ | 259.9 | | $ | 173.9 | | |
| Pre-tax Internal Rate of Return (IRR) | | 68.2 | % | % | **** | 49.2 | % | 36.5 | % | 27.2 | % | ||||
| Pre-tax Payback (Years) | | 1.6 | | | **** | 1.9 | | 2.1 | | 2.4 | | ||||
| After-tax Cash Flow, $M | | $ | 606.3 | | | $ | 403.2 | | $ | 280.9 | | $ | 199.0 | | |
| After-tax Net Present Value (5%) in $M | | $ | 486.4 | | | $ | 314.8 | | $ | 211.2 | | $ | 141.6 | | |
| After-tax Internal Rate of Return (IRR) | | 62.1 | % | % | **** | 44.3 | % | 32.6 | % | 24.0 | % | ||||
| After-tax Payback (Years) | | 1.6 | | | **** | 1.9 | | 2.2 | | 2.4 | |
All values are in US Dollars.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
EXPLORATION, OUTLOOK, AND FUTURE PLANS
2022 Exploration
Upon taking ownership of the South Railroad Project in August 2022, the Company accelerated exploration activities and expanded the project’s 2022 program. The 2022 program objectives included: (i) confirming historical drill results, and (ii) providing additional information, including increased drill hole spacing density, specific gravity measurements, and material for preliminary metallurgical test work necessary for Mineral Resources estimation upgrade and growth. In 2022, a total 9,796m of RC and 777m of diamond drill core drilling were completed.
2023 Exploration
Orla continued exploration efforts at South Railroad in 2023. The 2023 exploration program, consisting of 10,942m of RC drilling and 3,753m of core drilling, focused on (i) infill drilling of the North Bullion Sulphide Deposit to upgrade the Mineral Resource to Indicated category, (ii) near deposit drilling at Pinion and Dark Star to test extensions/continuity of mineralization, (iii) testing extensions of satellite deposits, and (iv) testing regional exploration targets.
Planned 2024 Exploration
Orla’s 2024 planned exploration program at South Railroad includes approximately 16,000 m in exploration drilling. Exploration drilling in 2024 will continue near-deposit exploration to potentially grow the resources at known deposits. Regional exploration will drill test selected exploration targets to test the potential for the discovery of additional satellite deposits, including Carlin- epithermal- and skarn-type gold and base metal type mineralization. Geological and geochemical field work will also be completed to develop and advance early-stage targets to the drill-stage across the >25 km strike length of the property.
OTHER MINERAL PROJECTS
Cerro Quema Project
The Cerro Quema Project is located on the Azuero Peninsula in the Los Santos Province of Southwestern Panama, about 45 km southwest of the city of Chitre. The project includes a pre-feasibility-stage, open-pit, heap leach gold project, a copper-gold sulphide resource, and various exploration targets. Additional information on the Cerro Quema Project is set forth in the technical report titled “Project Pre-Feasibility Updated NI 43-101 Technical Report on the Cerro Quema Project Province of Los Santos, Panama”, dated effective January 18, 2022 (the “Cerro Quema Report”).
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
On October 27, 2023, Panama’s President, Laurentino Cortizo Cohen, signed Executive Decree No. 23/2023 (“Decree 23-2023”). Decree 23-2023 (i) banned the granting of new concessions for the exploration, extraction, transportation and exploitation of metal mining in Panama, (ii) rejected all pending requests for the granting of new concessions for the exploration, extraction, transport and exploitation of metal mining and (iii) ordered MICI to dispose of the files within three months of the passing of Decree 23-2023. On November 3, 2023, the National Assembly of Panama passed Law 407, which instituted a moratorium on granting, renewing, or extending concessions for the exploration, extraction, transportation or exploitation of metal mining in Panama. On December 15, 2023, MCQSA, the Company’s subsidiary that holds the Cerro Quema Project, received three resolutions from MICI. The resolutions rejected the request for extension for the three mining concessions comprising the Cerro Quema Project, retroactively declared the concessions canceled, and declared the area comprising the concessions to be a reserve area under the Panamanian mining code. Under the Panamanian mining code, MICI is prohibited from granting mining concessions for exploration or extraction on a reserve area. On December 26, 2023, MCQSA filed requests for reconsideration of MICI’s decisions. On March 11, 2024, MICI rejected the requests for reconsideration.
As a result of the foregoing, the Company has removed the Mineral Resources and Mineral Reserve estimates for the Cerro Quema Project from the “Summary of Mineral Reserve and Mineral Resource Estimates” set forth in this AIF. In the event that the Company is able to reach an agreement with the Panamanian government or Law 407 is repealed, the Company expects to publicly report on such estimates again in future periods. For additional information, please refer to the Cerro Quema Report and the Company’s annual information form for the year ended December 31, 2022.
The Company is exploring all legal remedies available to protect its historical investments and potentially unlock additional value for its stakeholders. The Company intends to file a Notice of Intent to Arbitrate under the FTA. The Notice of Intent facilitates consultations between the Government of Panama and the Company. In the event that such consultations are unsuccessful, the Company expects to proceed to file a Request for Arbitration. See “Risk Factors – The Cerro Quema Project” for additional information.
The Company does not expect to expend additional funds on developing the Cerro Quema Project until it has greater certainty with respect to its mining concessions, as well as the fiscal and legal stability in Panama.
Lewis Project
The Lewis Project was acquired by the Company through its acquisition of Gold Standard. The project is strategically located adjacent to the north and within the Plan of Operations boundary of Nevada Gold Mines’ Phoenix Operation. The Lewis Project has an Inferred Mineral Resource of 206,000 ounces of gold (7.74 million tonnes at 0.83 g/t gold) and several additional prospective targets that have the potential to expand the resource base. For additional detail, see the technical report entitled “Technical Report and Mineral Resource Estimate for the Lewis Project, Lander County, Nevada, USA” dated June 15, 2020 and an effective date of May 1, 2020, which is available on SEDAR and EDGAR under Gold Standard’s profile at www.sedarplus.ca and www.sec.gov, respectively, as well as the Company’s website. The Lewis Project is not considered to be a material project for the Company. No exploration activities are planned at the Lewis Project in 2023.
RISK FACTORS
In addition to the usual risks associated with an investment in a mineral exploration, development, and operating company, the Company believes that, in particular, the risk factors set out below should be considered. It should be noted that this list is not exhaustive and that other risk factors may apply. If any of these risks materialize into actual events or circumstances or other possible additional risks and uncertainties of which the Directors of the Company are currently unaware or which they consider not to be material in relation to the Company’s business, actually occur, the Company’s assets, liabilities, financial condition, results of operations (including future results of operations), business, and business prospects could be materially adversely affected. In such circumstances, the price of the Company’s securities could decline, and investors may lose all or part of their investment. An investment in the Company may not be suitable for all investors.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
UNCERTAINTY IN THE ESTIMATION OF MINERAL RESERVES AND MINERAL RESOURCES
The figures for Mineral Reserves and Mineral Resources contained in this AIF are estimates only and no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized, or that Mineral Reserves or Mineral Resources will be mined or processed profitably. The Company cannot give any assurance that such estimates will be achieved. Failure to achieve such estimates could have an adverse impact on the Company’s future cash flows, profitability, results of operations and financial condition.
Until a deposit is actually mined and processed, the quantity of metal and grades must be considered as estimates only. Actual Mineral Reserves or Mineral Resources may not conform to geological, metallurgical, or other expectations, and the volume and grade of ore recovered may differ from estimated levels. There are numerous uncertainties inherent in estimating Mineral Reserves and Mineral Resources, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any Mineral Reserve or Mineral Resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. It is inherently impossible to have full knowledge of particular geological structures, faults, voids, intrusions, natural variations in and within rock types and other occurrences. Failure to identify such occurrences in the Company’s assessment of Mineral Reserves and Mineral Resources may have a material adverse effect on the Company’s future cash flows, results of operations, and financial condition.
Short-term operating factors relating to the Mineral Reserves, such as the need for orderly development of the ore bodies or the processing of new or different ore grades, may cause the mining operation to be unprofitable in any particular accounting period. In addition, there can be no assurance that gold recoveries in small scale laboratory tests will be duplicated in larger scale tests under on-site conditions or during production. Fluctuations in gold, silver, and base or other precious metals prices, results of drilling, metallurgical testing and production, and the evaluation of studies, reports, and plans subsequent to the date of any estimate may result in a revision of estimates from time to time or may render the estimates uneconomic to exploit. Mineral Resource and Mineral Reserve data is not indicative of future results of operations. Estimated Mineral Resources or Mineral Reserves for the Company’s properties are evaluated from time to time and may require adjustments or downward revisions based upon further exploration or development work, geological interpretation, drilling results, metal prices, or actual production experience. Any material reductions in estimates could have a material adverse effect on the Company’s results of operations and financial condition.
The category of Inferred Mineral Resource is the least reliable Mineral Resource category and is subject to the most variability. Due to the uncertainty which may attach to Inferred Mineral Resources, there is no assurance that Inferred Mineral Resources will be upgraded to Proven Mineral Reserves and Probable Mineral Reserves as a result of continued exploration. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
DEPENDENCE ON THE CAMINO ROJO OXIDE MINE
The Camino Rojo Oxide Mine accounts for all of the Company’s current production and is expected to continue to account for all of its production in the near term. Any adverse condition affecting mining, processing conditions, expansion plans, or ongoing permitting at the Camino Rojo Oxide Mine could have a material adverse effect on the Company’s financial performance and results of operations. Even though the Company has established mining operations and estimates of future production, various factors, including costs, actual mineralization, consistency and reliability of ore grades, processing rates, and commodity prices can affect cash flow and profitability, and there can be no assurance that current or future estimates of these factors will reflect actual results and performance. The cost and availability of suitable machinery, supplies, mining equipment, and skilled labour, the existence of competent operational management and prudent financial administration, as well as the availability and reliability of appropriately skilled and experienced consultants, can also affect successful project operations. The activities of the Company at the Camino Rojo Oxide Mine may also be subject to prolonged disruption from a variety of risks normally encountered in production of precious metals as further described below under “Risk Factors – Exploration, Development and Production Risks”. The failure of the Company to achieve its production estimates could have a material and adverse effect on its future cash flows, profitability, results of operations, and financial condition.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
INDEBTEDNESS
As of December 31, 2023, Orla had indebtedness under its Revolving Facility as discussed under the heading “General Development of the Business – Developments During 2023”. As a result, the Company is required to use a portion of its cash flow to service principal and interest on its debt, which will limit the cash flow available for other business opportunities. The Company’s ability to make scheduled payments of the principal of, to pay interest on, or to refinance indebtedness depends on its future performance, which is subject to economic, financial, competitive, and other factors beyond its control. The Company may not generate cash flow from operations in the future sufficient to service debt and make necessary capital expenditures. If the Company is unable to generate such cash flow, it may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. The Company’s ability to refinance its indebtedness will depend on the capital markets and its financial condition at such time. The Company may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default. The terms of the Revolving Facility also require the Company to satisfy various affirmative and negative covenants and financial ratios. These covenants and ratios limit, among other things, the Company’s ability to incur further indebtedness, create certain liens on assets, engage in certain types of transactions, or pay dividends. The Company can provide no assurances that in the future, it will not be limited in its ability to respond to changes in its business or competitive activities or be restricted in its ability to engage in mergers, acquisitions, or dispositions or acquisitions of assets. Furthermore, a failure to comply with these covenants and ratios would likely result in an event of default under the Revolving Facility and would allow the lenders to accelerate the debt, which could materially and adversely affect the Company’s business, financial condition, and results of operations, as well as the market price of the Company’s securities.
EXPLORATION, DEVELOPMENT, AND PRODUCTION RISKS
The business of exploring for minerals, development, and mining involves a high degree of risk. The operations of the Company may be disrupted by a variety of risks and hazards normally encountered in the exploration, development, and production of precious metals, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding, and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, personal injury or loss of life, and damage to tailings dams, property, and environmental damage, all of which may result in possible legal liability. The occurrence of any of these events could result in a prolonged interruption of the Company’s activities that would have a material adverse effect on its business, financial condition, results of operations, and prospects. Further, the Company may be subject to liability or sustain losses in relation to certain risks and hazards against which it cannot insure or for which it may elect not to insure. The occurrence of operational risks and/or a shortfall or lack of insurance coverage could have a material adverse impact on the Company’s results of operations and financial condition.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Even when mineralization is discovered, it may take several years until production is possible, during which time the economic feasibility of production may change. Major expenses may be required to locate and establish Mineral Reserves, to develop metallurgical processes, and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by Orla will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices that are highly cyclical, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital. There is no certainty that the expenditures made towards the search and evaluation of mineral deposits will result in discoveries or development of commercial quantities of ore. Development projects have no operating history upon which to base estimates of future capital and operating costs. For development projects, Mineral Resource estimates and estimates of operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility and pre-feasibility studies, which derive estimates of capital and operating costs based upon anticipated tonnage and grades of ore to be mined and processed, ground conditions, the configuration of the ore body, expected recovery rates of minerals from ore, estimated operating costs, and other factors. As a result, actual production, cash operating costs, and economic returns could differ significantly from those estimated. It is not unusual for new mining operations to experience problems during the start-up phase, and delays in the commencement of production can often occur.
FOREIGN COUNTRY AND POLITICAL RISK
The Company’s principal mineral properties are located in Mexico and the United States. The Company is subject to certain risks as a result of conducting foreign operations, including, but not limited to: currency fluctuations; possible political or economic instability that may result in the impairment or loss of mineral titles or other mineral rights; opposition from environmental or other non-governmental organizations; government regulations relating to the mining industry; renegotiation, cancellation, or forced modification of existing contracts; expropriation or nationalization of property; changes in laws or policies or increasing legal and regulatory requirements including those relating to taxation, royalties, imports, exports, duties, currency, or other claims by government entities, including retroactive claims and/or changes in the administration of laws, policies, and practices; uncertain political and economic environments; war, terrorism, narco-terrorist actions or activities, sabotage, and civil disturbances; delays in obtaining or the inability to obtain or maintain necessary governmental or similar permits or to operate in accordance with such permits or regulatory requirements; currency fluctuations; import and export regulations, including restrictions on the export of gold or other minerals; limitations on the repatriation of earnings; and increased financing costs. Any changes in regulations or shifts in political attitudes are beyond the control of the Company and may adversely affect its business.
The introduction of new tax laws, regulations, or rules, or changes to, or differing interpretation of, or application of, existing tax laws, regulations, or rules in any of the countries in which the Company currently conducts business or in the future may conduct business, could result in an increase in taxes, or other governmental charges, duties, or impositions. No assurance can be given that new tax laws, rules, or regulations will not be enacted or that existing tax laws will not be changed, interpreted, or applied in a manner that could result in the Company being subject to additional taxation or that could otherwise have a material adverse effect on the Company.
Although the Company believes that its exploration and production activities are currently carried out in accordance with all applicable rules and regulations, new rules and regulations may be enacted, and existing rules and regulations may be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the operations and activities of the Company or more stringent implementation thereof could have a material adverse effect on the Company’s business, financial condition, and results of operations.
The Company does not carry political risk insurance.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The Company’s primary operations are currently conducted in Mexico. Violence in Mexico is well documented and has, over time, been increasing. Conflicts between the drug cartels and violent confrontations with authorities are not uncommon. Other criminal activity, such as kidnapping and extortion, is also an ongoing concern. Many incidents of crime and violence go unreported and efforts by police and other authorities to reduce criminal activity are challenged by a lack of resources, corruption, and the pervasiveness of organized crime. Incidents of criminal activity have occasionally affected the communities in the vicinity of the Company’s operations. Such incidents may prevent access to the Company’s mines or offices; halt or delay operations and production; result in harm to employees, contractors, visitors, or community members; increase employee absenteeism; create or increase tension in nearby communities; or otherwise adversely affect the Company’s ability to conduct business. The Company can provide no assurance that security incidents, in the future, will not have a material adverse effect on its operations.
Additionally, on May 8, 2023, the Mexican government completed a decree reforming various provisions of the mining law (the “Decree”), which was published in the Official Gazette and became law on May 9, 2023. The Decree makes significant changes to the current mining laws, including but not limited to: reducing new mining license concession terms; restricting the granting of mining concessions requiring public auctions; imposing conditions on water use and availability; imposing regulations on mining concession transfers; imposing additional grounds for cancellation of mining concessions and further limitations on mining in protected areas; granting preferential rights to mining strategic minerals to state owned enterprises; imposing additional requirements for financial instruments to be provided to guarantee preventive, mitigation, and compensation measures resulting from the social impact assessment, as well as potential damages that may occur during mining activities. The full impact of the Decree on the Company is currently unknown, as the Mexican Government has yet to publish the associated regulations.
On June 16, 2023, the Company filed an “Amparo” in the Second District Court of the State of Zacatecas against the Decree on various grounds. An Amparo is a judicial action to protect a party’s rights from acts or omissions of governmental authorities that violate the rights and guarantees of such party that are protected by the Mexican Constitution. On August 25, 2023, the District Court judge declined to grant the Company’s motion to suspend application of the Decree while the Company awaits a final judgment on its Amparo, which decision the Company has appealed. The hearing for the Amparo was held in December 2023. In February 2024, District Court dismissed the Company’s Amparo, which the Company intends to appeal to the Collegiate Circuit Court of Mexico. If our challenge to the Decree is not successful, the changes to the mining law may have material impacts on our current and future exploration activities and operations in Mexico, the extent of which is yet to be determined.
THE CERRO QUEMA PROJECT
The Company holds an interest in the Cerro Quema Project, located in Panama.
On October 27, 2023, Panama’s President, Laurentino Cortizo Cohen, signed Decree 23-2023, which (i) banned the granting of new concessions for the exploration, extraction, transportation and exploitation of metal mining in Panama, (ii) rejected all pending requests for the granting of new concessions for the exploration, extraction, transport and exploitation of metal mining and (iii) ordered MICI to dispose of the files within three months of the passing of Decree 23-2023. On November 3, 2023, the National Assembly of Panama passed Law 407, which instituted a moratorium on granting, renewing, or extending concessions for the exploration, extraction, transportation or exploitation of metal mining in Panama. On December 15, 2023, MCQSA, the Company’s subsidiary that holds the Cerro Quema Project, received three resolutions from MICI, the Panamanian Ministry of Commerce and Industry. The resolutions rejected the Company’s request for extension for the concessions comprising the Cerro Quema Project, retroactively declared the concessions canceled, and declared the area comprising the concessions to be a reserve area under the Panamanian mining code. Under the Panamanian mining code, MICI is prohibited from granting mining concessions for exploration or extraction on a reserve area.
As a result of these developments and certain other factors, the Company incurred an impairment charge of $72.4 million in respect of the Cerro Quema Project for the financial year ended December 31, 2023.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The Company is exploring all legal remedies available to protect its historical investments and potentially unlock additional value for its stakeholders, including pursuing its rights under the FTA. In accordance with the provisions of the FTA, the Company expects that it will submit a Notice of Intent to Arbitrate to the Government of Panama. The Notice of Intent facilitates consultations between the Government of Panama and the Company. In the event that such consultations are unsuccessful, the Company expects to proceed to file a Request for Arbitration. This arbitration process may not be effective or successful. Even if successful, there is no certainty as to the quantum or timing of any award on damages and/or compensatory interest, recovery of all, or any, legal costs, or the Company’s ability to enforce any award against Panama. If consultations and the arbitration process are unsuccessful, the Company will lose its ability to monetize or put the Cerro Quema Project into production.
General elections in Panama are scheduled for May 5, 2024.
PERMITTING RISKS
The Company’s operations in each of the jurisdictions in which it operates are subject to receiving and maintaining permits (including environmental permits) from appropriate governmental authorities. Furthermore, prior to any development on any of its properties, the Company must receive permits from appropriate governmental authorities. The Company can provide no assurance that necessary permits will be obtained, that previously issued permits will not be suspended for a variety of reasons, including through government or court action, or that delays will not occur in connection with obtaining all necessary permits, renewals of permits for existing operations, or additional permits for any possible future changes to operations, or additional permits associated with new legislation. In addition, the timing of permits is uncertain and processing times may be negatively affected by unforeseen circumstances, such as COVID-19. The Company can provide no assurance that it will continue to hold or obtain, if required to, all permits necessary to develop or continue operating at any particular site, which would materially adversely affect its operations.
At Camino Rojo, the Company has experienced permitting delays and denials by the Mexican federal environmental authority, SEMARNAT, in connection with the amendments to the MIA required for the mine as set forth in the 2021 Camino Rojo Report. The Company understands that other mining projects in Mexico are also experiencing extended delays and denials of permits due to the policies of the current Mexican Administration. Protracted delays in obtaining the amendments to the MIA may require the Company to revise mine plans or curtail expected production, which could materially adversely affect Camino Rojo’s operations.
For the Company’s South Railroad Project, the BLM will need to publish the Notice of Intent in the Federal Register to officially commence the Environmental Impact Statement process for the project pursuant to NEPA. Once the Notice of Intent is published in the Federal Register, public scoping meetings can commence in conjunction with the Environmental Impact Statement. If successful, this process will culminate in the BLM issuing a Record of Decision permit for the project. The Company will also need an Individual Section 404 Permit from the United States Army Corps of Engineers and this agency will be a cooperating agency on the NEPA documents.
South Railroad will also require various other environmental permits issued by the Nevada Department of Environmental Protection and from other state and local agencies. In particular, South Railroad is located in greater sage grouse habitat and the project will be subject to the Nevada Conservation Credit System (the “CCS”), a regulatory framework designed to offset the impact to greater sage-grouse from anthropogenic disturbances, such as mining. The CCS will require South Railroad (as a debit generator) to acquire or purchase credits under the system, which may lead to increased operational costs and potential delays. Further, changes in the greater sage grouse population, evolving interpretations of existing rules under the CCS or alterations in the credit system itself may lead to additional costs and delays. There can be no assurance that the Company will acquire sage grouse credits on economically acceptable terms.
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| ORLA MINING LTD. | |
| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ENVIRONMENTAL AND OTHER REGULATORY REQUIREMENTS
The activities of the Company are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases, or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving to stricter standards and enforcement, and fines and penalties for noncompliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers, and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations. Environmental hazards may exist on the properties in which the Company holds its interests or on properties that will be acquired which are unknown to the Company at present and which have been caused by previous or existing owners or operators of those properties.
The Company’s current or future activities, including exploration and development activities and operations of the Company require licenses, permits, or other approvals from various governmental authorities and activities are and will be governed by laws and regulations governing exploration, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety, mine permitting, and other matters. Companies engaged in exploration and development activities generally experience increased costs and delays as a result of the need to comply with applicable laws, regulations, and permits. There can be no assurance that all permits that the Company may require for exploration and development will be obtainable on reasonable terms or on a timely basis, or that such laws and regulations would not have an adverse effect on any project that the Company may undertake. The Company believes it is in substantial compliance with all material laws and regulations that currently apply to its activities and that it does not currently have any material environmental obligations. However, there may be unforeseen environmental liabilities resulting from exploration, development, and/or mining activities and these may be costly to remedy.
The Company does not maintain insurance against all environmental risks. As a result, any claims against the Company may result in liabilities that could have a significant adverse effect on the operations and financial condition of the Company.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in exploration and development operations may be required to compensate those suffering loss or damage by reason of the exploration and development activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations and, in particular, environmental laws.
Amendments to current laws, regulations, and permits governing operations and activities of exploration companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in expenditures and costs or require abandonment or delays in developing new mining properties.
The Company cannot give any assurances that breaches of environmental laws (whether inadvertent or not) or environmental pollution will not materially or adversely affect its financial condition. There is no assurance that future changes to environmental regulation, if any, will not adversely affect the Company.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
For example, an ecological tax implemented by the state Congress of Zacatecas in 2017 could have a significant impact on the economics of the Camino Rojo Project. This tax is applied to cubic metres of material extracted during mining, square metres of material impacted by dangerous substances, tonnes of carbon dioxide produced during mining processes, and tonnes of waste stored in landfills. Due to the uncertainty of application of this tax and turbulence between active mining companies and the State of Zacatecas, the long-term effects and implementation of this ecological tax are currently unknown and were not considered in the 2021 Camino Rojo Report. The Company has received assessments in respect of this tax; however, the Company’s view is that the sections of the law pursuant to which these assessments have been issued do not apply to the Company at this time and, accordingly, the Company has filed the appropriate appeals. We expect this matter will be resolved by judicial process. Due to this uncertainty, no amounts have been accrued in the Company’s financial statements in respect of this ecological tax. The amounts eventually paid in respect of this tax could be material.
THE CAMINO ROJO PROJECT MINERAL RESOURCE ESTIMATE ASSUMES THAT THE COMPANY CAN ACCESS MINERAL TITLES AND LANDS THAT ARE NOT CONTROLLED BY THE COMPANY
All of the mineralization comprised in the Company’s Mineral Resource estimate with respect to the Camino Rojo Project is contained on mineral titles controlled by Orla. However, the Mineral Resource estimate assumes that the north wall of the conceptual floating pit cone used to demonstrate reasonable prospects for eventual economic extraction extends onto lands where mineral title is held by Fresnillo and that waste would be mined on Fresnillo’s mineral titles. On December 21, 2020, Orla announced that it had completed the Layback Agreement. The Layback Agreement allows Orla to expand the Camino Rojo Oxide Mine pit onto part of Fresnillo’s mineral concession located immediately north of Orla’s property. This expansion will increase oxide ore available for extraction on Orla’s property below the pit outlined in Orla’s previous 2019 Camino Rojo Report.
However, the Layback Agreement is only with respect to the portion of the heap leach material included in the current Mineral Reserve. As such, any potential development of the Camino Rojo Project that includes an open pit encompassing the entire Mineral Resource estimate would be dependent on an additional agreement with Fresnillo (or any potential subsequent owner of the mineral titles). It is estimated that approximately two-thirds of the mill resource estimate and one-quarter of the leach resource estimate comprising the Mineral Resource estimate are dependent on this additional agreement being entered into with Fresnillo. The leach Mineral Resource dependent on the additional agreement is mainly comprised of less oxidized transitional material with the lowest predicted heap-leach recoveries.
Delays in, or failure to obtain, an additional agreement with Fresnillo would affect the development of a significant portion of the Mineral Resources of the Camino Rojo Project that are not included in the 2021 Camino Rojo Report mine plan, in particular by limiting access to significant mineralized material at depth. There can be no assurance that the Company will be able to negotiate such additional agreement on terms that are satisfactory to the Company and Fresnillo or that there will not be delays in obtaining the necessary additional agreement. Should such a subsequent agreement with Fresnillo not be obtained on favourable terms, the economics of any potential mine development using the full Mineral Resource estimate would be significantly negatively impacted.
MINERAL RESOURCE ESTIMATIONS FOR THE CAMINO ROJO PROJECT ARE ONLY ESTIMATES AND RELY ON CERTAIN ASSUMPTIONS
The estimation of Mineral Resources relies on the judgment of the independent Qualified Person preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results, and industry practices. Valid estimates made at a given time may significantly change when new information becomes available.
In particular, the estimation of Mineral Resources for the Camino Rojo Project has assumed that there is a reasonable prospect for reaching an additional agreement with Fresnillo with respect to the mill resource included in the Mineral Resource estimate. While the Company believes that the Mineral Resource estimates for the Camino Rojo Project are well established and reflect best estimates, by their nature resource estimates are imprecise and depend on inferences that may ultimately prove to be inaccurate, including the assumption that an additional agreement with Fresnillo will be reached.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Although all mineralization included in the Company’s Mineral Resource estimate for the Camino Rojo Project are located on mineral concessions controlled by the Company, failure to reach an additional agreement with Fresnillo would result in a significant reduction of the Mineral Resource estimate by limiting access to Mineral Resources below the current Mineral Reserves. Any material changes in Mineral Resource estimates may have a material adverse effect on the Company.
SURFACE RIGHTS
Camino Rojo
There are four ejido communities in the vicinity of the main area of drilling at the Camino Rojo Project and other ejido lands cover most of the rest of the property. The lands that are used by the Company for the open pit mine and heap leach facility are subject to an expropriation agreement between the Company and the Ejido San Tiburcio. Currently, the Company has the legal possession of such lands until 2043. For exploration activities, the Company enters into temporary occupation agreements with the ejido communities, which allow the Company to use the surface of the lands for its mining activities for a set period of time. In Mexico, mining rights that are covered under a concession do not include direct ownership or possession rights over the surface, or surface access, and at any particular time the Company may be involved in negotiations with various ejido communities to enter into new temporary occupation agreements or other surface access agreements or amend existing agreements. Failure to reach new agreements or disputes regarding existing agreements may cause, blockades, suspension of operations, delays to projects, and, on occasion, may lead to legal disputes. Any such failure to reach new agreements or disputes regarding existing agreements may have a material adverse effect on the Company’s business.
South Railroad
Access to the Company’s South Railroad Project and certain mineral properties at the project are or will be governed by surface use agreements or other forms of access rights or agreements such as easements and rights-of-way. Failure to meet or otherwise satisfy required contractual obligations and make payments with respect to such agreements and rights or to otherwise obtain such agreements or rights may result in loss of access to the project or to certain mineral properties.
TITLE MATTERS
The acquisition of title to mineral tenures in Mexico and the United States is a detailed and time-consuming process. Although the Company has diligently investigated title to all mineral tenures and, to the best of its knowledge, title to all of its properties is in good standing, this should not be construed as a guarantee of title. The Company can provide no assurances that there are no title defects affecting its properties. Other parties may dispute title to any of the Company’s mineral properties and any of the Company’s properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected by, among other things, undetected encumbrances or defects or governmental actions. Title to the Company’s properties may also be affected by undisclosed and undetected defects. If any claim or challenge is made regarding title, the Company may be subject to monetary claims or be unable to develop properties as permitted or to enforce its rights with respect to its properties.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Certain of the Company’s mineral rights at the South Railroad Project consist of unpatented mining claims. Unpatented mining claims are unique real property interests and are generally considered to be subject to greater risk than other real property interests because the legal validity of unpatented mining claims is often uncertain. Unpatented mining claims provide only possessory title and their legal validity is often subject to contest by third parties or the federal government. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of mining claim boundaries and location monuments, assessment work, unregistered agreements, undetected defects, and possible conflicts with other mining claims. Since a substantial portion of all mineral exploration, development and mining in the western United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry.
The South Railroad Project is also subject to annual compliance with assessment work or fee requirements, property taxes, lease payments and other contractual payments and obligations. Any failure to make such payments or comply with such requirements or obligations could result in the loss of all or a portion of the Company’s interest in the South Railroad Project.
In addition, certain of the Company’s subsurface mineral rights to the South Railroad Project are secured or controlled by a contractual interest in private surface and mineral property in the form of various surface use agreements and mining/mineral leases. Subject to the terms of those agreements and leases, certain of those agreements and leases may not have provisions for automatic renewal. If the Company is not able to negotiate for the extension of those agreements and leases they may expire and no longer form part of the Company’s mineral portfolio, which may have a material adverse effect on the Company’s business.
WATER RIGHTS
The Company’s current and future mining operations will require significant quantities of water for mining, ore processing and related support facilities. In particular, the Company’s properties in Mexico and Nevada are in areas where water is scarce and competition among users for continuing access to water is significant. Continuous production and project development is dependent on the Company’s ability to acquire and maintain water rights and claims and to defeat claims adverse to current water uses in legal proceedings. The Company cannot predict the potential outcome of future legal proceedings relating to enforcement of water rights, claims and uses, or potential pressure from other users of water, government agencies and officials, and/or non-governmental organizations to limit the amount of water made available to or used for mining activities, regardless of legally valid water rights. Water shortages may also result from weather or environmental and climate impacts outside of the Company’s control, see “Risk Factors – Climate Change Risk”. Shortages in water supply or the inability to acquire and maintain water rights could result in development delays, as well as production and processing interruptions. In addition, the scarcity of water in certain regions could result in increased costs to obtain sufficient quantities of water for the Company to develop projects or conduct operations.
The loss of some or all water rights, ongoing litigation to enforce existing or new water rights, ongoing shortages of water to which the Company has rights and/or significantly higher costs to obtain sufficient quantities of water could result in the Company’s inability to develop its projects, maintain production at current or expected levels, require the Company to curtail or shut down mining operations and could prevent the Company from pursuing expansion or development opportunities, which could adversely affect the Company’s results of operations and financial condition. Laws and regulations may be introduced in some jurisdictions in which the Company operates which could also limit access to sufficient water resources, adversely affecting existing operations or expansion or development plans.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
For example, in Nevada, where the Company’s South Railroad Project is located, all water belongs to the public and is subject to appropriation for beneficial uses, such as mining. The Nevada State Engineer is responsible for administering and enforcing Nevada water law, which includes the appropriation of surface and ground water in the State. Water rights may be acquired by making an application to the State Engineer to acquire new water rights, or by leasing or purchasing existing water rights from a third party. New water rights are issued by the State Engineer based on prior appropriation (also known as “first in time, first in right”), which prioritizes parties with senior water rights in the event of overallocation, and water availability within an applicable hydrographic basin. The acquisition of water rights in Nevada is a systemic issue in mining and if water rights cannot be obtained on economically viable terms by the Company, the development of the South Railroad Project will be delayed or may no longer be economically feasible.
NATURAL DISASTERS, TERRORIST ACTS, HEALTH CRISES AND OTHER DISRUPTIONS AND DISLOCATIONS, INCLUDING BY THE COVID-19 PANDEMIC, WHETHER THOSE EFFECTS ARE LOCAL, NATIONWIDE OR GLOBAL
Upon the occurrence of a natural disaster, pandemic, or upon an incident of war, riot, or civil unrest, the impacted country, and the overall global economy, may not efficiently and quickly recover from such an event, which could have a material adverse effect on the Company. Terrorist attacks, public health crises including epidemics, pandemics, outbreaks of new infectious diseases or viruses, and related events can result in volatility and disruption to global supply chains, operations, mobility of people, patterns of consumption and service, and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations, and other factors relevant to the Company.
Global markets have been adversely impacted by emerging infectious diseases and/or the threat of outbreaks of viruses, other contagions or epidemic diseases, including the novel COVID-19, and many industries, including the mining industry, have been impacted. The outbreak has led to a widespread crisis that is adversely affecting the economies and financial markets of many countries. If increased levels of volatility continue, or in the event of a rapid destabilization of global economic conditions, there may be an adverse effect on commodity prices, demand for metals, availability of equity or credit, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Company’s securities. In addition, there may not be an adequate response to emerging infectious diseases, or significant restrictions may be imposed by a government, either of which may impact mining operations. There are potentially significant economic and social impacts, including labour shortages and shutdowns, delays and disruption in supply chains, social unrest, government or regulatory actions or inactions, including quarantines, travel restrictions, declaration of national emergencies, permanent changes in taxation or policies, decreased demand or the inability to sell and deliver doré or concentrates and resulting commodities, declines in the price of commodities, delays in permitting or approvals, suspensions or mandated shut downs of operations, governmental disruptions, or other unknown events with potentially significant impacts. At this time, the Company cannot accurately predict what impacts there will be or what effects these conditions will have on the business, including those uncertainties relating to the ultimate geographic spread, the duration of the outbreak, and the length of restrictions or responses that have been or may be imposed by the governments. Given the global nature of the Company’s operations, the Company may not be able to accurately predict which operations will be impacted. Any outbreak or threat of an outbreak of a contagious or epidemic disease could have a material adverse effect on the Company, its business and operational results, and the market price of its securities.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
FINANCING RISKS
The Company’s mining, process, exploration, and development activities may require additional financing. Historically, the Company has been financed through the issuance of Common Shares, debt, and other equity securities. Although the Company has been successful in the past in obtaining financing, there can be no assurance that additional funding, if required, will be available to it in the future to fulfill the Company’s existing obligations or further exploration and development and, if obtained, on terms favourable to the Company. The ability of the Company to arrange additional financing in the future will depend, in part, on prevailing capital market conditions as well as the business performance of the Company. If the Company raises additional financing through the issuance of Common Shares or securities convertible into Common Shares, this may result in dilution to the equity ownership of the Company’s existing shareholders. Failure to obtain required financing could result in delay or indefinite postponement of its anticipated activities in the coming years and could cause the Company to forfeit its interests in some or all of the Company’s properties or to reduce or terminate the Company’s operations. Failure to obtain required financing would have a material adverse effect on the Company’s business, financial condition, and results of operations.
PRODUCTION ESTIMATES
The Company has Mineral Reserve estimations for certain of its projects as set forth in this AIF. Such estimates are based on a Pre-Feasibility or Feasibility Study. The Company has also published production and cost guidance for 2024. The Company cannot give any assurance that such estimates will be achieved. Failure to achieve such estimates could have an adverse impact on the Company’s future cash flows, profitability, results of operations, and financial condition. The realization of estimates is dependent on, among other things, the accuracy of Mineral Reserve and Mineral Resource estimates, the accuracy of assumptions regarding grades and recovery rates, ground conditions (including hydrology), the physical characteristics of deposits, the presence or absence of particular metallurgical characteristics, and the accuracy of the estimated rates and costs of mining, haulage, and processing. Actual production may vary from estimates for a variety of reasons, including the actual ore mined varying from estimates of grade or tonnage; dilution and metallurgical and other characteristics (whether based on representative samples of ore or not); short-term operating factors such as the need for sequential development of ore bodies; mine failures or slope failures; industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts, rock slides, and earthquakes; encountering unusual or unexpected geological conditions; changes in power costs and potential power shortages; shortages of principal supplies needed for mining operations, including explosives, fuels, chemical reagents, water, equipment parts, and lubricants; plant and equipment failure; the inability to process certain types of ores; labour shortages or strikes; and restrictions or regulations imposed by government agencies or other changes in the regulatory environment. Such occurrences could also result in damage to mineral properties or mines, interruptions in production, injury or death to persons, damage to property of the Company or others, monetary losses, and legal liabilities, in addition to adversely affecting mineral production.
COST ESTIMATES
Capital and operating cost estimates discussed herein may not prove accurate. Capital and operating cost estimates are based on the interpretation of geological data, feasibility studies, anticipated climatic conditions, market conditions for required products and services, and other factors and assumptions regarding foreign exchange currency rates. Any of the following events could affect the ultimate accuracy of such estimate: unanticipated changes in grade and tonnage of ore to be mined and processed; incorrect data on which engineering assumptions are made; delay in construction schedules, unanticipated transportation costs; the accuracy of major equipment and construction cost estimates; labour negotiations; changes in government regulation (including regulations regarding prices, cost of consumables, royalties, duties, taxes, permitting, and restrictions on production quotas on exportation of minerals); and title claims. Changes in the Company’s anticipated production costs could have a major impact on any future profitability. Changes in costs of the Company’s anticipated mining and processing operations could occur as a result of unforeseen events, including international and local economic and political events, a change in commodity prices, increased costs (including oil, steel, and diesel) and scarcity of labour, and could result in changes in profitability or Mineral Reserve and Mineral Resource estimates. Many of these factors may be beyond the Company’s control. There is no assurance that actual costs will not exceed such estimates. Exceeding cost estimates could have an adverse impact on the Company’s future results of operations or financial condition.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
METAL PRICES
The Company’s long-term viability depends, in large part, upon the market price of gold and silver. Market price fluctuations of gold could adversely affect the profitability of the Company’s operations and lead to impairments and write downs of mineral properties. Metal prices have fluctuated widely, particularly in recent years. The marketability of metals is also affected by numerous other factors beyond the control of the Company, including government regulations relating to price, royalties, global consumption patterns, supply of, and demand for, metals, speculative activities, allowable production, and importing and exporting of minerals, the effect of which cannot accurately be predicted. There can be no assurance that the price of any commodities will be such that any of the properties in which the Company has an interest may be mined at a profit.
Declining metal prices can also impact operations by requiring a reassessment of the feasibility of a particular project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment may cause substantial delays and/or may interrupt operations until the reassessment can be completed, which may have a material adverse effect on the Company’s results of operations.
UNKNOWN LIABILITIES IN CONNECTION WITH ACQUISITIONS
As part of the Company’s acquisitions, the Company has assumed certain liabilities and risks. While the Company conducted thorough due diligence in connection with such acquisitions, there may be liabilities or risks that the Company failed, or was unable, to discover in the course of performing the due diligence investigations or for which the Company was not indemnified. Any such liabilities, individually or in the aggregate, could have a material adverse effect on the Company’s financial position and results of operations.
GLOBAL FINANCIAL CONDITIONS
Market events and conditions, including the disruptions in the international credit markets and other financial systems, along with political instability, falling currency prices expressed in United States dollars, ongoing hostilities in Ukraine and sanctions imposed by nations on Russia and Belarus, the uncertainty surrounding global supply chain, inflation, interest rates, and the critical measures implemented by governments globally related to the recent spread of diseases have resulted in commodity prices remaining volatile. These conditions have also caused fear and a loss of confidence in global credit markets, resulting in a climate of greater volatility, tighter regulations, less liquidity, widening credit spreads, increased credit losses, and tighter credit conditions. Notwithstanding various actions by governments, concerns about the general condition of the capital markets, financial instruments, banks and investment banks, insurers, and other financial institutions have caused the broader credit markets to be volatile. These events are illustrative of the effect that events beyond the Company’s control may have on: commodity prices; demand for metals, including gold and silver; availability of credit; investor confidence; and general financial market liquidity, all of which may adversely affect the Company’s business.
These factors may impact the ability of the Company to obtain equity or debt financing in the future and, if obtained, on terms favourable to the Company. Increased levels of volatility and market turmoil can adversely impact the Company’s operations and the value, and the price of the Common Shares could be adversely affected.
UNINSURED RISKS
Exploration, development, and production operations on mineral properties involve numerous risks, including but not limited to unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, landslides, earthquakes, and other environmental occurrences, risks relating to the storage and shipment of precious metal concentrates or doré bars, and political and social instability. Such occurrences could result in damage to mineral properties, damage to underground development, damage to production facilities, personal injury or death, environmental damage to the Company’s properties or the properties of others, delays in the ability to undertake exploration, monetary losses, and possible legal liability. Should such liabilities arise, they could reduce or eliminate future profitability and result in increasing costs and a decline in the value of the securities of the Company.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Although the Company maintains insurance to protect against certain risks in such amounts as it considers reasonable, its insurance policies do not cover all the potential risks associated with a mining company’s operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not always available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to liability for pollution or other hazards which it may not be insured against or which the Company may elect not to insure against because of premium costs or other reasons. The Company does not currently maintain insurance against political risks, underground development risks, production facilities risks, business interruption or loss of profits, theft of doré bars, the economic value to re-create core samples, environmental risks, and other risks. Furthermore, insurance limits currently in place may not be sufficient to cover losses arising from insured events. Losses from any of the above events may cause the Company to incur significant costs that could have a material adverse effect upon its financial performance and results of operations.
CLIMATE CHANGE
A number of governments have introduced or are moving to introduce climate change legislation and treaties at the international, national, state/provincial, and local levels. Regulation relating to emission levels (such as carbon taxes), energy efficiency, and reporting of climate-change related risks is becoming more stringent. If the current regulatory trend continues, this may result in increased costs at some or all of the Company’s operations. In addition, the physical risks of climate change may also have an adverse effect on the Company’s operations. These risks include, among other things, extreme weather events, resource shortages, changes in rainfall and in storm patterns and intensities, water shortages, and extreme temperatures. Climate-related events such as mudslides, floods, droughts and fires can also have significant impacts, directly and indirectly, on the Company’s operations and could result in damage to facilities, disruptions in accessing its sites with labour and essential materials or in shipping products from its mines, risks to the safety and security of its personnel and to communities, shortages of required supplies such as fuel and chemicals, inability to source enough water to supply its development and operations (see “Risk Factors – Water Rights” above), and the temporary or permanent cessation of one or more of the Company’s operations.
There can be no assurance that efforts to mitigate the risks of climate changes will be effective and that the physical risks of climate change will not have an adverse effect on the Company’s business, financial condition, and results of operations.
COMPETITIVE LANDSCAPE
The mineral exploration business is competitive in all of its phases. The Company competes with numerous other companies and individuals, including competitors with greater financial, technical, and other resources than the Company, in the search for and acquisition of exploration and development rights on desirable mineral properties, for capital to finance its activities, and in the recruitment and retention of qualified employees. There is no assurance that the Company will continue to be able to compete successfully with its competitors in acquiring exploration and development rights, financing, or recruiting and retaining employees.
CONFLICTS OF INTEREST
The Company’s Directors and officers may serve as directors or officers of other companies or have significant shareholdings in other resource companies and, to the extent that such other companies may participate in ventures in which the Company may participate, the Directors of the Company may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In the event that such a conflict of interest arises at a meeting of the Company’s Directors, a Director who has such a conflict will abstain from voting for or against the approval of such participation or such terms. In accordance with the CBCA, the Directors of the Company are required to act honestly, in good faith and in the best interests of the Company.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
COMPLIANCE WITH ANTI-CORRUPTION LAWS
The Company is subject to various anti-corruption laws and regulations including, but not limited to, the Canadian Corruption of Foreign Public Officials Act, the US Foreign Corrupt Practices Act, and similar laws in any country in which the Company conducts business. In general, these laws prohibit a company and its employees and intermediaries from bribing or making other prohibited payments to foreign officials or other persons to obtain or retain business or gain some other business advantage. In recent years, there has been a general increase in both the frequency of enforcement and the severity of penalties under such laws, resulting in greater scrutiny and punishment to companies convicted of violating anti-corruption and anti-bribery laws. Furthermore, a company may be found liable for violations by not only its employees, but also by its contractors and third-party agents.
The Company’s Camino Rojo Project is located in Mexico and the Cerro Quema Project is located in Panama, both of which countries which are perceived as having fairly high levels of corruption. Orla cannot predict the nature, scope, or effect of future anti-corruption regulatory requirements to which the Company’s operations might be subject or the manner in which existing laws might be administered or interpreted.
Failure to comply with the applicable legislation and other similar foreign laws could expose the Company and/or its senior management to civil and/or criminal penalties, other sanctions and remedial measures, legal expenses, and reputational damage, all of which could materially and adversely affect the Company’s business, financial condition, and results of operations. Likewise, any investigation of any potential violations of the applicable anti-corruption legislation by Canadian, American, or foreign authorities could also have an adverse impact on the Company’s business, financial condition, and results of operations.
As a consequence of these legal and regulatory requirements, the Company has instituted policies with regard to anti-corruption and anti-bribery, as well as business ethics, which have been designed to ensure that Orla and its employees comply with applicable anti-corruption laws and regulations. However, there can be no assurance or guarantee that such efforts have been and will be completely effective in ensuring the Company’s compliance, and the compliance of its employees, consultants, contractors, and other agents, with all applicable anti-corruption laws and regulations.
SHARE PRICE FLUCTUATIONS
The Common Shares are listed and posted for trading on the TSX and the NYSE American. An investment in the Company’s securities is highly speculative. In recent years, the securities markets have experienced a high level of price and volume volatility, and the market price of securities of many companies, particularly those considered exploration, development, and early-production stage companies such as the Company, have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values, or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur.
TAX MATTERS
The Company is subject to income taxes and other taxes in a variety of jurisdictions and the Company’s tax structure is subject to review by both Canadian and foreign taxation authorities. The Company’s taxes are affected by a number of factors, some of which are outside of its control, including the application and interpretation of the relevant tax laws and treaties. If the Company’s filing position were to be challenged for whatever reason, this could have a material adverse effect on the Company’s business, results of operations, and financial condition.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
CURRENCY FLUCTUATIONS
The Company’s operations in Mexico and the United States make it subject to foreign currency fluctuations and such fluctuations may materially affect the Company’s financial position and results. The Company reports its financial results in U.S. dollars, with the majority of transactions denominated in U.S. dollars, Canadian dollars, and Mexican pesos. As the exchange rates of the Canadian dollar and Mexican peso fluctuate against the U.S. dollar, the Company will experience foreign exchange gains or losses. As at the date of this AIF, the Company does not have any outstanding forward contracts and does not use an active hedging strategy to reduce the risk associated with currency fluctuations but may decide to do so in the future.
LIMITED OPERATING HISTORY
The Company has a limited history of generating operating revenues and profits and the development of the Company’s other properties will require the commitment of substantial financial resources. The amount and timing of expenditures will depend on a number of factors, some of which are beyond the Company’s control, including the progress of ongoing exploration, studies, and development, the results of consultant analysis and recommendations, and the execution of any joint venture agreements with strategic parties, if any. There can be no assurance that the Company will continue to generate profits in the future.
LITIGATION RISK
All industries, including the mining industry, are subject to legal claims, with and without merit. Defence and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation and dispute resolution process, the litigation process could take away from management time and efforts and the resolution of any particular legal proceeding to which the Company may become subject could have a material adverse effect on the Company’s financial position, results of operations, or the Company’s property development or operations.
ACQUISITIONS AND INTEGRATION
From time to time, the Company examines opportunities to acquire additional mining assets and businesses. Any acquisition that the Company may choose to complete may be of a significant size, may change the scale of the Company’s business and operations, and may expose the Company to new geographic, political, operating, financial, and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition, and integrate the acquired operations successfully with those of the Company. Any acquisitions would be accompanied by risks. For example, there may be a significant change in commodity prices after the Company has committed to complete the transaction and established the purchase price or exchange ratio; a material property may prove to be below expectations; the Company may have difficulty integrating and assimilating the operations and personnel of any acquired companies, realizing anticipated synergies and maximizing the financial and strategic position of the combined enterprise, and maintaining uniform standards, policies and controls across the organization; the integration of the acquired business or assets may disrupt the Company’s ongoing business and its relationships with employees, customers, suppliers, and contractors; and the acquired business or assets may have unknown liabilities which may be significant. In the event that the Company chooses to raise debt capital to finance any such acquisition, the Company’s leverage will be increased. If the Company chooses to use equity as consideration for such acquisition, existing shareholders may experience dilution. Alternatively, the Company may choose to finance any such acquisition with its existing resources. There can be no assurance that the Company would be successful in overcoming these risks or any other problems encountered in connection with such acquisitions.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
NON-GOVERNMENTAL ORGANIZATION INTERVENTION
In recent years, certain communities of both indigenous people and others, as well as non-governmental organizations, have been vocal and negative with respect to mining activities. The Company’s relationship with the communities in which it operates is critical to ensure the future success of its existing operations and the construction and development of its projects. Community groups or non-governmental organizations may create or inflame public unrest and anti-mining sentiment among the inhabitants in areas of mineral development. These communities and organizations have taken such actions as protests, road closures, work stoppages, and initiating lawsuits for damages. Such organizations can be involved, with financial assistance from various groups, in mobilizing sufficient local anti-mining sentiment to prevent the issuance of required permits for the development of mineral projects of other companies. While the Company is committed to operating in a socially responsible manner and obtain and increase its social acceptance to operate, there is no guarantee that the Company’s efforts in this respect will mitigate this potential risk. Any actions by communities and non-governmental organizations may have a material adverse effect on the Company’s development activities, financial position, cash flow, and results of operations.
OUTSIDE CONTRACTOR RISKS
Certain aspects of the Company’s mining operations, such as drilling, blasting, development, transportation, and other day-to-day operations, are conducted by outside contractors. As a result, the Company is subject to a number of risks, including: reduced control over the aspects of the tasks that are the responsibility of the contractors; failure of the contractors to perform under their agreements with the Company; inability to replace the contractors if their contracts are terminated; interruption of services in the event that the contractors cease operations due to insolvency or other unforeseen events; failure of the contractors to comply with applicable legal and regulatory requirements; and failure of the contractors to properly manage their workforce resulting in labour unrest or other employment issues.
UNRELIABLE HISTORICAL DATA
The Company has compiled technical data in respect of its projects, some of which was not prepared by the Company. While the data represents a useful resource for the Company, much of it must be verified by the Company before being relied upon in formulating exploration programs.
NO DIVIDENDS
No dividends on the Common Shares have been paid by the Company to date and the Company may not declare or pay any cash dividends in the foreseeable future. Any payments of dividends will be dependent upon the financial requirements of the Company to finance future growth, the financial condition of the Company, and other factors which the Company’s Board of Directors may consider appropriate in the circumstances. In addition, under the terms of the Revolving Facility, the Company is restricted from paying a dividend on the Common Shares unless certain covenants and ratios are met. See “Dividends” below.
FOREIGN SUBSIDIARIES
The Company conducts certain of its operations through foreign subsidiaries and some of its assets are held in such entities. Any limitation on the transfer of cash or other assets between the Company and such entities, or among such entities, could restrict the Company’s ability to fund its operations efficiently. Any such limitations, or the perception that such limitations may exist now or in the future, could have an adverse impact on the Company’s valuation and stock price.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ACCOUNTING POLICIES AND INTERNAL CONTROLS
The Company prepares its financial reports in accordance with IFRS applicable to publicly accountable enterprises. In preparing financial reports, management may need to rely upon assumptions, make estimates, or use their best judgment in determining the financial condition of the Company. Significant accounting policies are described in more detail in the Company’s annual consolidated financial statements. In order to have a reasonable level of assurance that financial transactions are properly authorized, assets are safeguarded against unauthorized or improper use, and transactions are properly recorded and reported, the Company has implemented and continues to analyze its internal control systems for financial reporting. Although the Company believes its financial reporting and annual consolidated financial statements are prepared with reasonable safeguards to ensure reliability, the Company cannot provide absolute assurance.
INTERNAL CONTROL OVER FINANCIAL REPORTING PURSUANT TO THE SARBANES-OXLEY ACT
The Company is required to assess its internal controls in order to satisfy the requirements of the Sarbanes–Oxley Act of 2002 (“SOX”). SOX requires an annual assessment by management of the effectiveness of the Company’s internal control over financial reporting. Beginning with the Company’s 2023 fiscal year, its auditor is also required to attest to the effectiveness of the Company’s internal control over financial reporting. The Company may fail to achieve and maintain the adequacy of its internal control over financial reporting, as such standards are modified, supplemented, or amended from time to time, and the Company may not be able to ensure that it can conclude on an ongoing basis that it has effective internal controls over financial reporting in accordance with SOX and the Company’s auditor may issue an adverse opinion on the effectiveness of its internal control over financial reporting. The Company’s failure to satisfy the requirements on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements which, in turn, could harm the Company’s business and negatively impact the trading price of its securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations. There can be no assurance that the Company will be able to remediate material weaknesses, if any, identified in future periods, or maintain all of the controls necessary for continued compliance, and there can be no assurance that the Company will be able to retain sufficient skilled finance and accounting personnel.
Future acquisitions of companies, if any, may provide the Company with challenges in implementing the required processes, procedures, and controls in its acquired operations. Future acquired companies, if any, may not have disclosure controls and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to the Company.
No evaluation can provide complete assurance that the Company’s internal control over financial reporting will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be reported. The effectiveness of the Company’s controls and procedures could also be limited by simple errors or faulty judgments. In addition, as the Company continues to expand, the challenges involved in implementing appropriate internal controls over financial reporting will increase and will require that the Company continue to improve its internal controls over financial reporting. Although the Company intends to devote substantial time and incur costs, as necessary, to ensure compliance, the Company cannot be certain that it will be successful in complying with these requirements on an ongoing basis.
The Company’s internal control over financial reporting may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
As described in the Company’s management’s discussion and analysis for the financial year ended December 31, 2023, the Company’s management determined that its internal controls over financial reporting and disclosure controls and procedures were not effective for the most recently completed financial year as a result of material weaknesses. The Company identified that management’s review controls at its Mexican operating subsidiary were not designed or operating effectively. The Company also identified that there were ineffective information technology general controls in areas of user access and change management over an IT system that supports the Company’s financial reporting process. Although the Company is implementing a remediation plan for these material weaknesses, there can be no assurance that such remediation will be successful for future periods.
ENFORCEMENT OF CIVIL LIABILITIES
Substantially all of the assets of the Company are located outside of Canada and certain of the Directors of the Company are resident outside of Canada. As a result, it may be difficult or impossible to enforce judgments granted by a court in Canada against the assets of the Company or the Directors of the Company residing outside of Canada.
POSSIBLE U.S. FEDERAL INCOME TAX CONSEQUENCES FOR U.S. INVESTORS
The Company may be treated as a “passive foreign investment company” under the U.S. Internal Revenue Code, which could result in adverse U.S. federal income tax consequences for U.S. investors. Prospective U.S. investors should be aware that they could be subject to certain adverse U.S. federal income tax consequences if the Company is classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. The determination of whether the Company is a PFIC for a taxable year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations, and such determination will depend on the composition of the Company’s income, expenses, and assets from time to time and the nature of the activities performed by its officers and employees. Prospective U.S. investors should consult their own tax advisors regarding the likelihood and consequences of the Company being treated as a PFIC for U.S. federal income tax purposes, including the advisability of making certain elections that may mitigate certain possible adverse income tax consequences but may result in an inclusion in gross income without receipt of such income.
INFORMATION AND CYBER SECURITY
The Company’s information systems, and those of its third-party service providers and vendors, are vulnerable to an increasing threat of continually evolving cyber security risks. Unauthorized parties may attempt to gain access to these systems or the Company’s information through fraud or other means of deceiving the Company’s third-party service providers or vendors.
The Company’s operations depend, in part, on how well the Company and its suppliers, protect networks, equipment, information technology (“IT”) systems and software against damage from a number of threats. Orla has entered into agreements with third parties for hardware, software, telecommunications, and other services in connection with its operations. The Company also depends on the timely maintenance, upgrade, and replacement of networks, equipment, IT systems, and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays, and/or increases in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact the Company’s reputation and results of operations.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
Although to date the Company has not experienced any known material losses relating to cyber attacks or other data/information security breaches, there can be no assurance that Orla will not incur such losses in the future. The Company’s risk and exposure to these matters cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes, and practices designed to protect systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority.
Any future significant compromise or breach of the Company’s data/information security, whether external or internal, or misuse of data or information, could result in additional significant costs, lost sales, fines, and lawsuits, and damage to the Company’s reputation. In addition, as the regulatory environment related to data/information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to the Company’s business, compliance with those requirements could also result in additional costs. As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
SIGNIFICANT SHAREHOLDERS
The Company has significant shareholders that may be able to exert influence over the direction of the Company’s business.
To the Company’s knowledge, as of March 18, 2024, Newmont, Fairfax Financial Holdings Limited, Pierre Lassonde, and Agnico Eagle, as well as their respective affiliates (collectively, the “Significant Shareholders”), each held approximately 13.7%, 17.7%, 10.1% and 8.8%, respectively, of the Common Shares. In addition, Newmont and Agnico Eagle are each a party to an investor rights agreement with the Company, which, among other things, provides each with certain pro rata rights to maintain their equity interest in the Company and rights to Board appointees. See the Company’s most recent Management Information Circular for additional information.
The Significant Shareholders, either in unison and/or individually, may have some influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders of the Company for approval, including business combinations and any proposed sale of all or substantially all of the Company’s assets. Unless full participation of a number of other shareholders takes place in such shareholder meetings, the Significant Shareholders may be able to approve on their own, or effectively prevent the approval, of any such significant corporate transactions.
Further, the significant ownership of Common Shares by the Significant Shareholders may affect the market price and liquidity of the Common Shares. The effect of these rights and their influence may impact the price that investors are willing to pay for Common Shares. If any of these parties sells a substantial number of Common Shares in the public market, the market price of the shares could decrease.
GOLD INDUSTRY CONCENTRATION
Orla is concentrated in the gold mining industry, and as such, the Common Shares and Orla’s profitability will be particularly sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold mining industry. Orla may be susceptible to an increased risk of loss, including losses due to adverse occurrences affecting the Company more than the market as a whole, as a result of the fact that its operations are concentrated in the gold mining sector.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
SHAREHOLDER ACTIVISM
Publicly traded companies are often subject to demands or publicity campaigns from activist shareholders advocating for changes to corporate governance practices, such as executive compensation practices, social issues, or for certain corporate actions or reorganizations. There can be no assurance that the Company will not be subject to any such campaign, including proxy contests, media campaigns, or other activities. Responding to challenges from activist shareholders can be costly and time consuming and may have an adverse effect on the Company’s reputation. In addition, responding to such campaigns would likely divert the attention and resources of the Company’s management and Board, which could have an adverse effect on the Company’s business and results of operations. Even if the Company were to undertake changes or actions in response to activism, activist shareholders may continue to promote or attempt to effect further changes and may attempt to acquire control of the Company. If shareholder activists are ultimately elected to the Board, this could adversely affect the Company’s business and future operations. This type of activism can also create uncertainty about the Company’s future strategic direction, resulting in loss of future business opportunities, which could adversely affect the Company’s business, future operations, profitability, and the Company’s ability to attract and retain qualified personnel.
DESCRIPTION OF CAPITAL STRUCTURE
COMMON SHARES
The authorized share capital of the Company consists of an unlimited number of Common Shares without par value and an unlimited number of Class A preferred shares. As of December 31, 2023, there were 315,073,995 Common Shares and no Class A preferred shares issued and outstanding and, as of the date of this AIF, there were 315,073,995 Common Shares and no Class A preferred shares issued and outstanding. The Class A preferred shares were issued in connection with the Company’s acquisition of Pershimco, and all such shares were cancelled in accordance with their terms.
Holders of Common Shares are entitled to receive notice of any meetings of shareholders of the Company, to attend and to cast one vote per Common Share at all such meetings. Holders of Common Shares do not have cumulative voting rights with respect to the election of Directors and, accordingly, holders of a majority of the Common Shares entitled to vote in any election of Directors may elect all Directors standing for election. Holders of Common Shares are entitled to receive on a pro rata basis such dividends, if any, as and when declared by the Board at its discretion from funds legally available for the payment of dividends and upon the liquidation, dissolution or winding up of the Company are entitled to receive on a pro rata basis the net assets of the Company after payment of debts and other liabilities, in each case subject to the rights, privileges, restrictions, and conditions attaching to any other series or class of shares ranking senior in priority to or on a pro rata basis with the holders of Common Shares with respect to dividends or liquidation. The Common Shares do not carry any pre-emptive, subscription, redemption, or conversion rights, nor do they contain any sinking or purchase fund provisions.
WARRANTS
None of the Company’s outstanding share purchase warrants are listed and posted for trading on the TSX or the NYSE American and none of the Company’s outstanding share purchase warrants are governed by the terms of a warrant indenture.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
The following table summarizes information about the number of warrants outstanding as of December 31, 2023 and as of the date of this AIF:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| Expiry date | **** | Exercise price | **** | December 31, 2023 | **** | Date of this AIF | |||
| December 18, 2026 | | C$ | 3.00 | | 28,253,200 | | 28,253,200 | ||
| Total number of warrants | | | | 28,253,200 | | 28,253,200 | |||
| | | | | | | | | | |
| Weighted average exercise price | | | | | C$ | 3.00 | | C$ | 3.00 |
STOCK OPTIONS, RESTRICTED SHARE UNITS, DEFERRED SHARE UNITS AND BONUS SHARES
As at March 18, 2024:
| ● | 4,129,227 Common Shares are issuable on exercise of outstanding stock options; |
|---|---|
| ● | 580,219 Common Shares are issuable upon vesting of outstanding Restricted Share Units; |
| --- | --- |
| ● | 701,927 Common Shares are issuable upon vesting of outstanding Deferred Share Units (or cash may be payable in lieu thereof); and |
| --- | --- |
| ● | 1,278,476 Common Shares are issuable on exercise of outstanding Replacement Options. |
| --- | --- |
In addition, the Company has granted an entitlement to its Chairman of the Board to receive a one-time award of 500,000 Common Shares (“Chairman Bonus Shares”) at a deemed price of C$1.39 per Chairman Bonus Share in consideration for his acting as Chairman of the Board, which Chairman Bonus Shares have certain vesting restrictions. The Chairman Bonus Shares will vest and become issuable on the date that Mr. Jeannes ceases to act as a director of the Company, unless the Chairman Bonus Shares sooner vest upon a change of control of the Company as defined in the award agreement.
DIVIDENDS
The Company has not paid any dividends on its Common Shares since its incorporation. The Company has no present intention of paying dividends on its Common Shares, as it anticipates that all available funds will be invested to finance the growth of its business. The payment of future cash dividends, if any, will be reviewed periodically by the Board and will depend upon, among other things, conditions then existing including earnings, financial condition, and capital requirements, restrictions in financing agreements, business opportunities and conditions, and other factors. In addition, under the terms of the Revolving Facility, the Company is prohibited from declaring, paying, or setting aside for payment any dividend on the Common Shares unless certain financial covenants and ratios are met. See “Risk Factors – No Dividends”.
MARKET FOR SECURITIES
TRADING PRICE AND VOLUME
The Common Shares are currently listed and posted for trading on the TSX under the symbol “OLA” and on the NYSE American under the symbol “ORLA”. The following table sets forth information relating to the trading of the Common Shares on the TSX and NYSE American for the most recently completed financial year ended December 31, 2023.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
| TSX | NYSE AMERICAN |
|---|
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| Month | **** | High (C) | Low (C) | Volume | **** | Month | **** | High () | Low () | Volume |
| January 2023 | 5.84 | 5.00 | 8,911,694 | January 2023 | 4.36 | 3.72 | 3,382,417 | |||
| February 2023 | 5.97 | 5.10 | 14,015,445 | February 2023 | 4.40 | 3.79 | 3,075,711 | |||
| March 2023 | 6.90 | 5.48 | 14,709,260 | March 2023 | 5.01 | 4.00 | 8,238,700 | |||
| April 2023 | 6.71 | 5.98 | 11,815,641 | April 2023 | 5.02 | 4.39 | 7,770,107 | |||
| May 2023 | 6.48 | 5.50 | 9,035,840 | May 2023 | 4.82 | 4.04 | 6,669,348 | |||
| June 2023 | 6.29 | 5.10 | 9,123,156 | June 2023 | 4.68 | 3.83 | 6,034,043 | |||
| July 2023 | 6.35 | 5.44 | 8,346,537 | July 2023 | 4.82 | 4.08 | 5,421,728 | |||
| August 2023 | 6.50 | 5.85 | 6,828,080 | August 2023 | 4.81 | 4.36 | 5,168,126 | |||
| September 2023 | 6.52 | 4.78 | 15,335,208 | September 2023 | 4.82 | 3.53 | 6,515,322 | |||
| October 2023 | 4.91 | 4.19 | 8,247,057 | October 2023 | 3.60 | 3.02 | 12,399,849 | |||
| November 2023 | 4.55 | 3.89 | 12,773,315 | November 2023 | 3.33 | 2.79 | 15,616,648 | |||
| December 2023 | 4.62 | 3.53 | 14,814,243 | December 2023 | 3.50 | 2.60 | 13,256,709 |
All values are in US Dollars.
The price of the Common Shares as quoted by the TSX and NYSE American on December 31, 2023 was C$4.32 and $3.25, respectively, and on March 18, 2024 was C$4.94 and $3.63, respectively.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
PRIOR SALES
Except as disclosed below with respect to the Company’s equity compensation arrangements, the Company did not issue any securities in its most recent financial year that are of a class that is not listed or quoted for trading on a marketplace. During 2023, the Company issued the following securities under its equity compensation arrangements:
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | | **** | | **** | Issue Price / | |
| Type of Security | | Number of Securities | | Date Issued | | Exercise Price | |
| Stock options | 445,988 | March 27, 2023 | | $ | 6.58 | ||
| | | 11,272 | | May 23, 2023 | | $ | 6.07 |
| Performance share units^(1)(2)^ | | 198,737 | | March 27, 2023 | | $ | 6.601 |
| Restricted share units^(1)^ | 283,032 | | March 27, 2023 | | $ | 6.58 | |
| | | 12,397 | | May 23, 2023 | | $ | 6.07 |
| Deferred share units^(1)^ | 98,781 | | March 27, 2023 | | $ | 6.58 | |
| | | 18,484 | | June 21, 2023 | | $ | 5.41 |
| | | 24,937 | | November 20, 2023 | | $ | 4.01 |
Notes:
| (1) | Represents the deemed value of the performance share units, restricted share units or deferred share units on the date of award by the Company, although no money has been, or will be, paid to the Company in connection with the settlement of such rights. |
|---|---|
| (2) | The Company’s performance share units are settled in cash. |
| --- | --- |
For detailed information about the Company’s equity compensation arrangements, specifically, the Company’s stock option plan, performance share unit plan, restricted share unit plan and deferred share unit plan, including the compensation principles that govern the grants made, please refer to the Management Information Circular of the Company dated May 11, 2023 prepared for its most recent annual meeting of shareholders held on June 21, 2023 and filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. This information will also be contained in the Management Information Circular of the Company to be prepared in connection with the Company’s 2024 annual meeting of shareholders currently scheduled to be held in June 2024, which will be available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
DIRECTORS AND OFFICERS
NAME, OCCUPATION AND SECURITY HOLDING
The following table sets out the name, province or state, and country of residence of each current Director and executive officer of the Company, their respective positions held with the Company and their respective principal occupations during the preceding five years.
| | | |
|---|---|---|
| Name, Province and Country of Residence, and Position | Director/Executive Officer Since | Principal Occupation for the Past Five Years |
| Jason D. Simpson ^3^<br><br>President, Chief Executive Officer and Director<br><br>Ontario, Canada | November 2018 | Director, President and Chief Executive of the Company since November 2018; Chief Operating Officer of Torex Gold Resources Inc. (mining company) from January 2013 to November 2018. |
| Charles A. Jeannes ^1, 2, 4^<br><br>Director <br>(Non-Executive Chairman of the Board of Directors)<br><br>Nevada, USA | June 2017 | Non-Executive Chairman of the Board of Directors; Director of Tahoe Resources Inc. from January 2017 to February 2019; Director of Pan American Silver Corp. since February 2019 and Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) since November 2016 (mining companies); former President and Chief Executive Officer of Goldcorp (mining company) from 2009 until April 2016, and Executive Vice President, Corporate Development from 2006 until 2008; serves as a Trustee of the Wolf Pack Athletic Association of the University of Nevada (a non-profit Board). |
| Tim Haldane ^3, 5^<br><br>Director<br><br>Arizona, USA | June 2017 | Mining professional with international project development experience; previously Senior Vice-President of Operations - USA and Latin America at Agnico Eagle (mining company) from 2014 until February 2017. |
| Jean Robitaille ^2, 5^<br><br>Director<br><br>Ontario, Canada | December 2016 | Executive Vice-President, Chief Strategy & Technology Officer at Agnico Eagle (mining company) since 2022; Over 35 years at Agnico Eagle, including as Senior Vice-President, Corporate Development, Business Strategy & Technical Services (2020-2022), Senior Vice-President, Business Strategy & Technical Services (2014-2019), Senior Vice-President, Technical Services and Project Development (2008 to 2013), Vice-President, Metallurgy and Marketing, General Manager, Metallurgy and Marketing and Mill Superintendent and Project Manager; prior to Agnico Eagle, Mr. Robitaille worked as a metallurgist with Teck Mining Group (mining company); director of Pershimco Resources Inc. (2011 to 2016). |
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|---|---|---|
| Name, Province and Country of Residence, and Position | Director/Executive Officer Since | Principal Occupation for the Past Five Years |
| David Stephens ^1, 4^<br><br>Director<br><br>Ontario, Canada | March 2018 | Partner, Agentis Capital Mining Partners (capital markets advisory) and consultant (mining and technology) from 2019-present; VP, Marketing and Director at San Cristobal Mining Inc. from 2023-present; Head of Engineering at Vrify Technologies Inc. (mining investment technology) from 2020-2022; Vice President, Corporate Development and Marketing at Goldcorp (mining company) from 2017-2019; Vice President, Treasurer of Goldcorp (2016-2017). |
| Elizabeth McGregor ^1, 2^<br><br>Director<br><br>British Columbia, Canada | June 2019 | Executive Vice President and Chief Financial Officer of Tahoe Resources Inc. (mining company) from August 9, 2016 until the acquisition by Pan American Silver Corp. on February 22, 2019; prior to her role as Chief Financial Officer, she served as Tahoe Resources Inc.’s VP Treasurer; Goldcorp (mining company) from 2007 to 2013, where she held various financial roles including Director of Project Finance and Cost Control; Administration Manager at the Peñasquito mine; and Director of Risk. She has served as a director of Kinross Gold Corporation (“Kinross”) since November 6, 2019. |
| Tamara Brown ^2, 3, 5^<br><br>Director<br><br>Ontario, Canada | June 2022 | Partner, Oberon Capital Corporation (boutique investment bank) from 2022 to present; Director, Lithium Royalty Corp. (mining royalty company) from 2023 – present and 29 Metals Limited (mining company) from 2023 – present. Previous experience also includes positions as a non-executive director of Lundin Gold, Eastmain Resources and Superior Gold; as well as Vice President, Investor Relations and Corporate Development (Americas) for Newcrest Mining; Vice President, Corporate Development and Investor Relations for Primero Mining; and Director of Investor Relations for IAMGOLD (all mining companies). |
| Ana Sofía Ríos^3, 4^<br><br>Director<br><br>Mexico | June 2023 | Partner, Chevez Ruiz Zamarripa (law firm) since 2019. Previous experience as a Founding Partner at Tuloyer (law firm) and general counsel at Alsis Funds (financial advisor). Currently an alternate independent board member of Grupo Corporativo Cever, S.A. de C.V. (a private Mexican corporate group that manages vehicle dealerships and restaurant brands) and the Vice-president Legal Committee, Banking Commission of the International Chamber of Commerce - Mexico (ICC Mexico). |
| Rob Krcmarov ^5^<br><br>Director<br><br>Ontario, Canada | November 2023 | Currently an independent board member with Coeur Mining (mining company), Osisko Gold Royalties (royalty company) and Major Drilling (mining drilling company). Previously, held various positions at Barrick Gold Corporation (mining company) from 2001 to 2023, most recently as Executive Vice President Exploration and Growth. |
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
| | | |
|---|---|---|
| Name, Province and Country of Residence, and Position | Director/Executive Officer Since | Principal Occupation for the Past Five Years |
| Scott Langley ^6^<br><br>Director<br><br>Ontario, Canada | June 2022 | Vice President, Corporate Development, Newmont Corporation (mining company) since 2022. Previously was the Managing Director, Head of North American Metals & Mining, Bank of America (finance) from 2019 to 2022 and Managing Director, National Bank (finance) from 2016 to 2019. |
| Etienne Morin<br><br>Chief Financial Officer<br><br>British Columbia, Canada | April 2018 | Chief Financial Officer of the Company since April 2018; previously held various financial and capital markets roles at Goldcorp (mining company) from 2006 to 2018, including Director, Investor Relations, Director, Corporate Development, and Director, Business Planning and Financial Evaluations. |
| Andrew Cormier<br><br>Chief Operating Officer<br><br>Ontario, Canada | April 2020 | Chief Operating Officer of the Company since April 2020; previously was VP Development and Construction at Alamos Gold Inc. from 2013 to 2020; Project Manager at AuRico Gold Inc. 2007 to 2013; Principal Metallurgist at SNC-Lavalin from 2004 to 2007; he worked for various mining companies in operations; from 1993 to 2004. |
| Sylvain Guerard<br><br>Senior Vice President, Exploration<br><br>Ontario, Canada | August 2020 | Senior Vice President, Exploration of the Company since August 2020; Senior Vice President Exploration at McEwen Mining Inc. from 2017 to August 2020; Senior Vice President, Exploration at Kinross from 2014 to 2016 and various other roles at Kinross from 2009 to 2014 (all mining companies). |
| Chafika Eddine<br><br>Chief Sustainability Officer<br><br>Panama | March 2022 | Chief Sustainability Officer of the Company since March 2022; Sustainability and Governance Consultant for various mining companies, including Lundin Mining and New Gold, 2015 to March 2022; Corporate Social Responsibility Manager (Director level) for Hudbay Minerals, 2012 to 2015; Vice-President Corporate Affairs for Bear Creek Mining, 2004 to 2009. |
| Paul Mann<br><br>Vice President, Finance and Accounting<br><br>British Columbia, Canada | April 2022 | Vice President, Finance and Accounting of the Company since 2022 and previously the Company’s Corporate Controller from 2018 to 2022. Previously was Corporate Controller, Fortuna Silver Mines (mining company) from 2016 to 2018 and VP Finance and Reporting at Hunter Dickinson (mining management services) from 2007 to 2016. |
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
| Andrew Bradbury<br><br>Vice President, Corporate Development and Investor Relations<br><br>Ontario, Canada | April 2022 | Vice President, Corporate Development and Investor Relations of the Company since 2022 and previously Director, Investor Relations from 2020 to 2022. Previously held roles in corporate development and business improvement at Teranga Gold Corporation (mining company). |
|---|---|---|
| Brendan DePoe<br><br>Corporate Counsel and Corporate Secretary<br><br>British Columbia, Canada | April 2023 | Corporate Counsel and Corporate Secretary of the Company since 2021. Previously was an associate at Blake, Cassels & Graydon LLP (law firm) from 2013 to 2021. |
Notes:
| (1) | Member of the Audit Committee. Ms. McGregor is the Chairperson of the Audit Committee. |
|---|---|
| (2) | Member of the Human Resources and Compensation Committee. Mr. Robitaille is the Chairman of the Human Resources and Compensation Committee. |
| --- | --- |
| (3) | Member of the Environmental, Sustainability, Health & Safety Committee. Ms. Brown is the Chairman of the Environmental, Sustainability, Health & Safety Committee. |
| --- | --- |
| (4) | Member of the Corporate Governance & Nominating Committee. Mr. Stephens is the Chairman of the Corporate Governance & Nominating Committee. |
| --- | --- |
| (5) | Member of the Technical Committee. Mr. Haldane is the Chairman of the Technical Committee. |
| --- | --- |
| (6) | Mr. Langley is Newmont’s nominee to the Board in accordance with the investor rights agreement between Newmont and the Company dated November 7, 2017. |
| --- | --- |
Each Director’s term of office expires at the next annual meeting of shareholders of the Company or when his/her successor is duly elected or appointed, unless his/her term ends earlier in accordance with the articles or by-laws of the Company, he/she resigns from office or he/she becomes disqualified to act as a Director of the Company.
As at March 18, 2024, and based on the disclosure available on the System for Electronic Disclosure by Insiders (“SEDI”), the Directors and executive officers of the Company, as a group, beneficially own, directly or indirectly, or exercise control or direction over 7,968,429 Common Shares, representing approximately 2.53% of the total number of Common Shares outstanding before giving effect to the exercise of stock options, restricted share units, deferred share units or warrants to purchase Common Shares held by such Directors and executive officers.
CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
To the knowledge of the Company, none of the Directors or executive officers of the Company is, as at the date of this AIF, or was within ten years before the date of this AIF, a director, chief executive officer or chief financial officer of any company (including the Company), that: (a) was subject to a cease trade order or similar order or an order that denied the relevant company access to any exemption under securities legislation, which order was in effect for a period of more than 30 consecutive days (an “Order”) that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or (b) was subject to an Order that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.
None of the Directors or executive officers of the Company or, to the Company’s knowledge, any shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company have been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or have entered into a settlement agreement with a securities regulatory authority, or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
None of the Directors or executive officers of the Company, or, to the Company’s knowledge, any shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company: (a) is, as at the date of this AIF, or has been within ten years before the date of this AIF, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) has, within the ten years before the date of this AIF, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or shareholder.
CONFLICTS OF INTEREST
To the best of the Company’s knowledge, and other than as disclosed in this AIF, there are no known existing or potential conflicts of interest between the Company and any of the Company’s Directors or officers. However, certain of the Directors and officers of the Company are directors, officers and/or shareholders of other private and publicly listed companies, including companies that engage in mineral exploration and development and therefore it is possible that a conflict may arise between their duties to the Company and their duties to such other companies. All such conflicts will be dealt with pursuant to the provisions of the applicable corporate legislation and the Company’s Code of Business Conduct and Ethics. In the event that such a conflict of interest arises at a meeting of the Directors, a Director affected by the conflict must disclose the nature and extent of his interest and abstain from voting for or against matters concerning the matter in respect of which the conflict arises. Directors and executive officers are required to disclose any conflicts or potential conflicts to the Board of Directors as soon as they become aware of them. See the section of this AIF entitled “Risk Factors – Conflicts of Interest”.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
Except as set forth below, there are no material legal proceedings or regulatory actions involving Orla or its properties as at the date of this AIF, and Orla is not aware of any such proceedings or actions currently contemplated.
As discussed in this AIF under “Mineral Projects – Other Mineral Projects – Cerro Quema Project” and “Risk Factors – The Cerro Quema Project”, the Company is exploring all legal remedies available to protect its historical investments and potentially unlock additional value for its stakeholders in connection with the Government of Panama’s decision to cancel the mining concessions comprising the Cerro Quema Project. The Company intends to file a Notice of Intent to Arbitrate under the FTA, which facilitates consultations between the Government of Panama and the Company. In the event that such consultations are unsuccessful, the Company expects to proceed to file a Request for Arbitration. Although the Company intends to pursue these legal remedies, the Company’s preference is an amicable resolution with the Government of Panama the results in a positive outcome for all stakeholders.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
No Director or executive officer of the Company, no person or company that beneficially owns, or controls or directs, directly or indirectly, more than 10% of any class or series of the Company’s outstanding voting securities and no associate or affiliate of any of such persons or companies has any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Company.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
TRANSFER AGENTS AND REGISTRARS
The transfer agent and registrar for the Common Shares is Computershare Investor Services Inc. at its principal offices in Vancouver, British Columbia and Toronto, Ontario. The co-transfer agent and registrar for the Common Shares in the United States of America is Computershare Trust Company, N.A. in Canton, Massachusetts, Jersey City, New Jersey and Louisville, Kentucky.
MATERIAL CONTRACTS
The only material contracts entered into by the Company within the financial period ended December 31, 2023 or since such time or before such time that are still in effect, other than those in the ordinary course of business, are as follows:
| 1. | The Amended Credit Agreement in respect of the Revolving Facility. See “General Development of the Business – Developments During 2023” for further details. |
|---|---|
| 2. | The Layback Agreement. See “General Development of the Business – Developments During 2021” for further details. |
| --- | --- |
INTERESTS OF EXPERTS
QUALIFIED PERSONS UNDER NI 43-101
The following persons have been named as having prepared or certified a report, valuation, statement, or opinion described or included in a filing, or referred to in a filing, made under National Instrument 51-102 – Continuous Disclosure Obligations during, or relating to, the Company’s financial year ended December 31, 2023:
| ● | 2021 Camino Rojo Report – Carl E. Defilippi, RM, SME of KCA, Matthew D. Gray, Ph.D., C.P.G. of RGI, Michael G. Hester, FAusIMM of IMC and John J. Ward, C.P.G. of John Ward, RG, Groundwater Consultant, LLC. Mr. Hester is also the qualified person responsible for the updated Mineral Resource estimate for the Camino Rojo Oxide Mine as set out in this AIF under “Summary of Mineral Reserve and Mineral Resource Estimates”. |
|---|---|
| ● | South Railroad Report – Matthew Sletten, PE of M3, Benjamin Bermudez, PE of M3, Art S. Ibrado, PE, of Fort Lowell Consulting PLLC, Michael Lindholm, CPG, of RESPEC, Thomas Dyer, PE, of RESPEC, Jordan Anderson, QP RM-SME, of RESPEC, Gary L. Simmons, QP-MMSA of GL Simmons Consulting, LLC, Richard DeLong, QP-MMSA, RG, PGm, of EM Strategies, and Kevin Lutes, PE, of NewFields Mining Design & Technical Services. |
| --- | --- |
None of the foregoing persons, or any director, officer, employee, or partner thereof, as applicable, received or has received a direct or indirect interest in the Company’s property or the property of any of the Company’s associates or affiliates. Each of the aforementioned persons are independent of the Company and held an interest in either less than 1% or none of the Company’s securities or the securities of any associate or affiliate of the Company at the time of preparation of the respective reports and after the preparation of such reports and estimates, and they did not receive any direct or indirect interest in any of the Company’s securities or the securities of any associate or affiliate of the Company in connection with the preparation of the applicable report. None of the aforementioned persons nor any director, officer, employee, or partner, as applicable, of the aforementioned companies or partnerships is currently expected to be elected, appointed, or employed as a director, officer or employee of the Company or of any associate or affiliate of the Company.
All scientific and technical information in this AIF has been reviewed and approved by J. Andrew Cormier, P.Eng., and Sylvain Guerard, P. Geo., each of whom is a “Qualified Person” under NI 43-101. Mr. Stephen Ling, Director of Technical Services at Orla and a “Qualified Person” under NI 43-101, is responsible for the updated Mineral Reserve estimates for the Camino Rojo Oxide Mine as set out in this AIF under “Summary of Mineral Reserve and Mineral Resource Estimates”.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
As of the date hereof, Mr. Cormier held 82,200 Common Shares, 553,663 stock options, 48,843 restricted share units, and 45,447 performance share units, Mr. Guerard held 7,530 Common Shares, 264,932 stock options, and 34,195 restricted share units, and Mr. Ling held 11,272 stock options and 12,397 restricted share units.
AUDITORS
The Company’s independent auditors are Ernst & Young LLP, Chartered Professional Accountants, who have issued an Independent Auditor’s Report in respect to the Company’s consolidated financial statements for the year ended December 31, 2023. Ernst & Young LLP has advised the Company that they are independent with respect to the Company within the context of the CPA Code of Professional Conduct of the Chartered Professional Accountants of British Columbia and in compliance with Rule 3520 of the Public Company Accounting Oversight Board (United States) (PCAOB).
AUDIT COMMITTEE INFORMATION
The Audit Committee has the responsibility of, among other things: overseeing financial reporting, internal controls, the audit process and the establishment of “whistleblower” and related policies; recommending the appointment of the independent auditor and reviewing the annual audit plan and auditor compensation; pre-approving audit, audit related and tax services to be provided by the independent auditor; and reviewing and recommending approval to the Board of Directors of annual and quarterly financial statements and management’s discussion and analysis.
The Audit Committee’s charter sets out its responsibilities and duties, qualifications for membership, procedures and reporting to the Company’s Board of Directors. A copy of the charter is attached hereto as Schedule “A” to this AIF.
COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three Directors. The following table sets out the name of each current Audit Committee member and whether they are “independent” and “financially literate”. To be considered independent, a member of the Audit Committee must not have any direct or indirect material relationship with the Company. A material relationship is a relationship which could, in the view of the Board, reasonably interfere with the exercise of a member’s independent judgement. To be considered financially literate, a member of the Audit Committee must have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected by the Company’s financial statements.
| | |||||
|---|---|---|---|---|---|
| Name of Member | **** | Independent | **** | Financially Literate | |
| Elizabeth McGregor | | Yes^(1)^ | | Yes^(1)^ | |
| Charles A. Jeannes | | Yes^(1)^ | | Yes^(1)^ | |
| David Stephens | | Yes^(1)^ | | Yes^(1)^ | |
Note:
(1) As defined under National Instrument 52-110 Audit Committees (“NI 52-110”) and within the meaning of the applicable NYSE American listing standards and requirements.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
RELEVANT EDUCATION AND EXPERIENCE
The education and experience of each Audit Committee member that is relevant to the performance of his or her responsibilities as an Audit Committee member and, in particular, any education or experience that would provide the member with: an understanding of the accounting principles used by Orla to prepare its financial statements; the ability to assess the general application of such accounting principles in connection with the accounting for estimates, accruals and provisions; experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by Orla’s financial statements, or experience actively supervising one or more persons engaged in such activities; and an understanding of internal controls and procedures for financial reporting, is set out below.
ELIZABETH MCGREGOR
Ms. McGregor served as the Executive Vice President and Chief Financial Officer of Tahoe Resources Inc. from August 2016 until the acquisition by Pan American Silver Corp. in February 2019. Ms. McGregor is a Canadian Chartered Professional Accountant (CPA, CA) and, prior to her role as Chief Financial Officer, served as Tahoe Resources Inc.’s VP Treasurer. She directed financial planning, corporate liquidity, financial reporting and risk management. Prior to joining Tahoe Resources Inc., she worked at Goldcorp from 2007 to 2013 where she held various financial roles including Director of Project Finance and Cost Control; Administration Manager at the Peñasquito mine; and Director of Risk. Ms. McGregor has also served as a director of Kinross Gold Corporation since November 6, 2019. Ms. McGregor began her career at KPMG as Audit Manager. She holds a B.A. (Hons) from Queen’s University in Kingston.
DAVID STEPHENS
Mr. Stephens is a partner at Agentis Capital Mining Partners, which provides capital markets advisory services. Mr. Stephens is also VP, Marketing and a director of San Cristobal Mining Inc. He also provides consulting services in the mining and technology industries through his private consulting company. He was the Vice President, Corporate Development and Marketing at Goldcorp until its acquisition by Newmont, having previously served as Vice President and Treasurer. Prior to joining Goldcorp, Mr. Stephens spent ten years working in investment banking and equity research at various organizations including Macquarie Capital Markets Canada Ltd. and Orion Securities. Mr. Stephens holds a Bachelor’s degree in Electrical Engineering and Computer Science from Harvard University.
CHARLES JEANNES
Mr. Jeannes served as President and Chief Executive Officer of Goldcorp from 2009 until April 2016, and Executive Vice President, Corporate Development from 2006 until 2008. From 1999 until the acquisition of Glamis Gold Ltd. (“Glamis”) by Goldcorp, he was Executive Vice President, Administration, General Counsel and Secretary of Glamis. Prior to joining Glamis, Mr. Jeannes worked for Placer Dome Inc., most recently as Vice President of Placer Dome North America. He is also currently a Director of Pan American Silver Corp. and Wheaton Precious Metals Corp. (formerly Silver Wheaton Corp.) and serves as a Trustee of the Wolf Pack Athletic Association of the University of Nevada (a non-profit Board). He holds a Bachelor of Arts degree from UNR and graduated from the University of Arizona School of Law with honours in 1983. He practiced law from 1983 until 1994 and has broad experience in capital markets, mergers and acquisitions, public and private financing, and international operations.
AUDIT COMMITTEE OVERSIGHT
Since the commencement of Orla’s most recently completed financial year, there has not been a recommendation of the Audit Committee to nominate or compensate an external auditor which was not adopted by the Board of Directors.
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
RELIANCE ON CERTAIN EXEMPTIONS
At no time since the commencement of the Company’s most recently completed financial year has the Company relied on the exemption in Section 2.4, Section 3.2, Section 3.4, Section 3.5 or Section 3.8 of NI 52-110 or an exemption from NI 52-110, in whole or in part, granted under Part 8 of NI 52-110.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established policies and procedures that are intended to control the services provided by the Company’s auditors and to monitor their continuing independence. Under these policies, no services may be undertaken by the Company’s auditors, unless the engagement is specifically approved by the Audit Committee or the services are included within a category that has been pre-approved by the Audit Committee. The maximum charge for services is established by the Audit Committee when the specific engagement is approved or the category of services pre-approved. Management is required to notify the Audit Committee of the nature and value of pre-approved services undertaken.
The Audit Committee will not approve engagements relating to, or pre-approve categories of, non-audit services to be provided by Orla’s auditors (i) if such services are of a type whereby the performance of which would cause the auditors to cease to be independent within the meaning of applicable rules, and (ii) without consideration, among other things, of whether the auditors are best situated to provide the required services and whether the required services are consistent with their role as auditor.
EXTERNAL AUDITOR SERVICE FEES
The aggregate fees billed by the Company’s external auditors in each of the last two financial years are as follows:
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | | **** | | | **** | | | **** | | |
| Financial Year Ended | | Audit Fees ^(1)^ | | Audit-Related Fees ^(2)^ | | Tax Fees ^(3)^ | | All Other Fees ^(4)^ | ||||
| December 31, 2023 | | C$ | 1,802,000 | | C$ | NIL | | C$ | 90,500 | | C$ | NIL |
| December 31, 2022 | | C$ | 698,840 | | C$ | NIL | | C$ | 32,100 | | C$ | NIL |
Notes:
| (1) | Fees billed for professional services rendered by the Company’s external auditor for the audit and review of the financial statements or services that are normally provided by the external auditor in connection with statutory and regulatory filings or engagements. |
|---|---|
| (2) | Fees billed by the Company’s external auditor for assurance-related services that are not included in “audit fees”. |
| --- | --- |
| (3) | Fees for professional services rendered by the Company’s external auditor for tax compliance, tax advice and tax planning. |
| --- | --- |
| (4) | Fees for products and services provided by the Company’s external auditor, other than services reported under the table headings “Audit Fees”, “Audit-Related Fees” or “Tax Fees”. |
| --- | --- |
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
ADDITIONAL INFORMATION
Additional information relating to the Company may be found on SEDAR+ at www.sedarplus.ca, on EDGAR at www.sec.gov and on the Company’s website at www.orlamining.com.
Additional information, including Directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, is contained in the Management Information Circular of the Company dated May 11, 2023 prepared for its most recent annual meeting of shareholders held on June 21, 2023 and filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. This information will also be contained in the Management Information Circular of the Company to be prepared in connection with the Company’s 2024 annual meeting of shareholders, currently scheduled to be held in June 2024 which will be available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Additional financial information is provided in the Company’s audited consolidated financial statements and management discussion and analysis for the financial year ended December 31, 2023, which are filed on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
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| Annual Information Form | |
| Year ended December 31, 2023 | United States dollars unless otherwise stated |
SCHEDULE “A”
ORLA MINING LTD.
CHARTER OF THE AUDIT COMMITTEE
INTRODUCTION
The primary responsibility of the Audit Committee (the “Committee”) is to oversee Orla Mining Ltd.’s (the, “Company” or “Orla”) financial reporting process on behalf of the Company’s Board of Directors (the “Board”) in order to assist the directors of the Company in meeting their responsibilities with respect to financial reporting by the Company.
Management is responsible for the preparation, presentation and integrity of the Company’s financial statements and for the appropriateness of the accounting principles and reporting policies that are used by the Company. The independent auditors are responsible for auditing the Company’s annual financial statements.
**1.**RESPONSIBILITIES AND AUTHORITY
The role, responsibility, authority and power of the Committee includes, but is not be limited to the following:
| (a) | the Committee shall be directly responsible for the appointment and termination (subject to Board and shareholder ratification), compensation and oversight of the work of the independent auditors, including resolution of disagreements between management and the independent auditors regarding financial reporting; |
|---|---|
| (b) | the Committee shall ensure that at all times there are direct communication channels between the Committee and the internal auditors, if applicable, and the external auditors of the Company to discuss and review specific issues, as appropriate; |
| --- | --- |
| (c) | the Committee shall discuss with the independent auditors (and internal auditors, if applicable) the overall scope and plans for their audits, including the adequacy of staff. The Committee shall discuss with management and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company’s policies and procedures to assess, monitor, and manage business risk and legal risk; |
| --- | --- |
| (d) | the Committee shall, at least annually, obtain and review a report by the independent auditors: |
| --- | --- |
| (i) | describing their internal quality control procedures; |
| --- | --- |
| (ii) | reviewing any material issues raised by the most recent internal quality control review, or peer review, or any inquiry or investigation by a government or professional institute or society, within the preceding five years, respecting any independent audit carried out by the independent auditors, and any steps taken to deal with any such issues; and |
| --- | --- |
| (iii) | outlining all relationships between the independent auditor and the Company in order to assess the auditor’s independence; |
| --- | --- |
| (e) | the Committee shall review and assess the performance of the independent auditors annually and share the results with the Board. |
| --- | --- |
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| (f) | the Committee shall meet separately, on a regular basis, with management and the independent auditors to discuss any issues or concerns, current or forthcoming, warranting Committee attention. As part of this process, the Committee shall provide sufficient opportunity for the independent auditors to meet privately with the Committee; |
|---|---|
| (g) | the Committee shall receive regular reports from the independent auditors on critical policies and practices of the Company, including all alternative treatment of financial information within generally accepted accounting principles which have been discussed with management. Where alternative treatment exists, the independent auditors shall be invited to express their opinion as to whether the Company is using best practices; |
| --- | --- |
| (h) | the Committee shall review management’s assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditors’ report on management’s assertion; |
| --- | --- |
| (i) | the Committee shall review and discuss earnings press releases (including the non-GAAP measures presented in such releases), as well as information and earnings guidance provided to analysts and rating agencies; |
| --- | --- |
| (j) | the Committee shall review the interim and annual financial statements and disclosures under management’s discussion and analysis of financial condition and results of operations with management and the annual audited statements with the independent auditors, prior to recommending them to the Board for approval, release or inclusion in any reports to shareholders and/or securities commissions; |
| --- | --- |
| (k) | the Committee shall receive reports, if any, from corporate legal representatives of evidence of material violation of securities laws or breaches of fiduciary duty; |
| --- | --- |
| (l) | the Committee shall review and ensure that procedures are in place for the receipt, retention and treatment of complaints received by the Company regarding accounting and auditing matters, as well as the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters; |
| --- | --- |
| (m) | the Committee shall meet as often as it deems appropriate to discharge its responsibilities and, in any event, at least four (4) times per year. Additional meetings may be held as deemed necessary by the Chair of the Audit Committee (the “Chair”) or as requested by any Committee member or the external auditors or management; |
| --- | --- |
| (n) | the Committee shall review all issues related to a change of auditor, including the information to be included in the notice of change of auditor and the planned steps for an orderly transition; |
| --- | --- |
| (o) | the Committee shall pre-approve all non-audit services to be provided to the Company by the external auditors; |
| --- | --- |
| (p) | the Committee shall assess policies and procedures for cash management and review investment strategies for the Company’s cash balances on an annual basis; |
| --- | --- |
| (q) | the Committee shall review the Company’s overall tax plan and any material tax planning initiatives on an annual basis; |
| --- | --- |
| (r) | the Committee shall review the Company’s insurance policies on an annual basis and consider the extent of any uninsured exposure and the adequacy of coverage; |
| --- | --- |
| (s) | the Committee shall review the Company’s cybersecurity, privacy and data risk exposures and measures taken to protect the confidentiality, integrity and availability of information systems and Company (including employee) data; |
| --- | --- |
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| (t) | the Committee shall review and approve the Company’s policy with regard to the hiring of current and former partners or employees of the present and former external auditors; |
|---|---|
| (u) | the Committee shall review the expenses of the Chief Executive Officer and the Chairman of the Board on a quarterly basis; |
| --- | --- |
| (v) | the Committee shall report on all the foregoing matters to the directors of the Company at the next Board meeting following; |
| --- | --- |
| (w) | subject to the provisions of Part 3 of National Instrument 52-110, at all times, the membership of the Committee shall be such that: |
| --- | --- |
| (i) | it shall be comprised of no fewer than three members; |
| --- | --- |
| (ii) | each of the members thereof shall be “unrelated directors” or “independent” directors of the Company, as may be defined by the Toronto Stock Exchange, the British Columbia Securities Commission or any other regulator to which the Company reports or may report in the future; |
| --- | --- |
| (iii) | each member of the Committee shall be financially literate in terms of the ability to read and understand a set of financial statements; |
| --- | --- |
| (iv) | no member of the Committee shall have a material business relationship with the Company; |
| --- | --- |
| (x) | no business shall be transacted by the Committee except at a meeting of the members thereof at which; |
| --- | --- |
| (v) | a majority of the members thereof are present; |
| --- | --- |
| (vi) | by a resolution in writing signed by all of the members of the Committee; |
| --- | --- |
| (y) | the minutes of all meetings of the Audit Committee shall be provided to the Board. |
| --- | --- |
**2.**WHISTLEBLOWER POLICY
With regard to the Company’s Whistleblower Policy (the “Whistleblower Policy”), the Committee shall:
| (a) | review periodically and recommend to the Board any amendments to the Whistleblower Policy and monitor the procedures established by management to ensure compliance; |
|---|---|
| (b) | review actions taken by management to ensure compliance with the Whistleblower Policy and its response to any violations; and |
| --- | --- |
| (c) | review all reports received pursuant to the Whistleblower Policy and investigate each complaint and take appropriate action within the guidelines set forth in the Whistleblower Policy. |
| --- | --- |
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| Year ended December 31, 2023 | United States dollars unless otherwise stated |
**3.**RESPONSIBILITIES OF THE COMMITTEE CHAIR
The fundamental responsibility of the Chair is to be responsible for the management and effective performance of the Committee and to provide leadership to the Committee in fulfilling its Charter and any other matters delegated to it by the Board. To that end, the Chair’s responsibilities shall include:
| (a) | working with the Chairman of the Board to establish the frequency of Committee meetings and the agendas for such meetings; |
|---|---|
| (b) | providing leadership to the Committee and presiding over Committee meetings; |
| --- | --- |
| (c) | facilitating the flow of information to and from the Committee and fostering and environment in which Committee members may ask questions and express their viewpoints; |
| --- | --- |
| (d) | reporting to the Board with respect to significant activities of the Committee and any recommendations of the Committee; |
| --- | --- |
| (e) | addressing, or causing to be addressed, all concerns communicated to the Chair under the Whistleblower Policy; |
| --- | --- |
| (f) | leading the Committee in annually reviewing and assessing the adequacy of its mandate and evaluating its effectiveness in fulfilling its mandate; and |
| --- | --- |
| (g) | taking such other steps as are reasonably required to ensure that the Committee carries out its mandate. |
| --- | --- |
**4.**ADOPTION
ADOPTED AND APPROVED by the Board on December 6, 2016.
AMENDED AND APPROVED by the Committee and the Board on August 5, 2021.
FURTHER AMENDED AND APPROVED by the Committee and the Board on August 8, 2022.
FURTHER AMENDED AND APPROVED by the Committee and the Board on August 3, 2023.
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Table of Contents Exhibit 99.2
Management’s Discussion and Analysis
Year ended December 31, 2023
Amounts in United States dollars
Page 1
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
TABLE OF CONTENTS
| I. | OVERVIEW | 3 | |
|---|---|---|---|
| II. | SUMMARY | 4 | |
| III. | OUTLOOK AND UPCOMING MILESTONES | 6 | |
| IV. | GUIDANCE | 7 | |
| | A. | 2023 GUIDANCE COMPARISON | 7 |
| | B. | 2024 GUIDANCE | 8 |
| V. | DISCUSSION OF OPERATIONS | 9 | |
| | A. | CAMINO ROJO, MEXICO | 9 |
| | B. | SOUTH RAILROAD PROJECT, NEVADA | 14 |
| | C. | OTHER PROJECTS - CERRO QUEMA PROJECT, PANAMA | 16 |
| VI. | NON-GAAP MEASURES | 17 | |
| VII. | SUMMARY OF QUARTERLY RESULTS | 21 | |
| VIII. | THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2023 | 23 | |
| IX. | LIQUIDITY | 26 | |
| X. | INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES | 27 | |
| XI. | CAPITAL RESOURCES | 30 | |
| XII. | RELATED PARTY TRANSACTIONS | 31 | |
| XIII. | OFF-BALANCE SHEET ARRANGEMENTS | 32 | |
| XIV. | PROPOSED TRANSACTIONS | 32 | |
| XV. | CRITICAL ACCOUNTING ESTIMATES | 33 | |
| XVI. | FINANCIAL INSTRUMENTS | 35 | |
| XVII. | OUTSTANDING SHARE DATA | 35 | |
| XVIII. | CAUTIONARY NOTES | 36 | |
| XIX. | RISKS AND UNCERTAINTIES | 39 |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**I.**OVERVIEW
Orla Mining Ltd. is a mineral exploration, development, and production company that trades on the Toronto Stock Exchange under the ticker symbol “OLA” and on the NYSE American under the symbol “ORLA”. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries unless the context otherwise indicates.
Orla’s corporate strategy is to acquire, develop, and operate mineral properties where our expertise can substantially increase stakeholder value. We have two material gold projects:
| ● | Camino Rojo, located in Zacatecas State, Mexico, consisting of the Camino Rojo oxide gold mine (the “Camino Rojo Oxide Mine” or “Camino Rojo”), which achieved commercial production effective April 1, 2022, and the Camino Rojo sulphides project (“Camino Rojo Sulphides”); and |
|---|---|
| ● | South Railroad (“South Railroad” or the “South Railroad Project”), located in the state of Nevada, United States, consisting of the Dark Star and Pinion deposits and situated within a prospective land package, along the Carlin trend in Nevada. |
| --- | --- |
This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2023 and the related notes thereto, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Cautionary Notes near the end of this document are an important part of this MD&A.
Additional information about our Company, including our most recent consolidated financial statements and Annual Information Form, is available on the Company website at www.orlamining.com, under the Company’s profile on the System for Electronic Document Analysis and Retrieval + (“SEDAR+”) at www.sedarplus.ca, and the Company’s documents filed with, or furnished to, the United States Securities and Exchange Commission (“SEC”), which are available through the SEC’s Electronic Data Gathering and Retrieval System (“EDGAR”) at www.sec.gov.
This MD&A is current as of March 19, 2024.
Andrew Cormier, P.Eng., the Chief Operating Officer of the Company, is a Qualified Person, as the term is defined in National Instrument 43-101 (“NI 43-101”) and has reviewed and approved the technical information disclosed in this MD&A.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**II.**SUMMARY
Q4 2023 Highlights
| ● | Fourth quarter gold production was a record 34,484 ounces and gold sold was 31,300 ounces, generating $62.9 million in revenue. |
|---|---|
| ● | All-in sustaining cost ^1^ (“AISC”) for the quarter of $802 per ounce of gold sold. |
| --- | --- |
| ● | Cash on hand at December 31, 2023 of $96.6 million. |
| --- | --- |
| ● | Adjusted earnings^1^ of $15.7 million resulting in adjusted earnings per share of $0.05. |
| --- | --- |
| ● | Net loss of $58.4 million for the quarter resulting in loss per share of $0.19. This includes a $72.4 million charge for impairment of the Cerro Quema project (“Cerro Quema” or the “Cerro Quema Project”). |
| --- | --- |
| ● | Cash flow from operating activities before changes in non-cash working capital of $24.7 million. |
| --- | --- |
| ● | Exploration and project costs of $12.6 million during the quarter, of which $3.3 million was capitalized and $9.3 million was expensed. |
| --- | --- |
FY 2023 Highlights
| ● | Full year gold production was 121,877 ounces and gold sold was 118,993 ounces, generating $233.6 million in revenue. |
|---|---|
| ● | All-in sustaining cost^1^ (“AISC”) for the year of $736 per ounce of gold sold. |
| --- | --- |
| ● | Adjusted earnings^1^ of $47.8 million resulting in adjusted earnings per share of $0.15. |
| --- | --- |
| ● | Net loss of $27.0 million for the year resulting in loss per share of $0.09. This includes the charge for impairment of Cerro Quema. |
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| ● | Cash flow from operating activities before changes in non-cash working capital of $68.9 million. |
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| ● | Exploration and project costs of $47.3 million for the year, of which $12.7 million was capitalized and $34.6 million was expensed. |
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| ● | The Company amended its $150 million credit facility ( “Credit Facility”) with its existing syndicate of lenders. The amended facility consists of a $150 million revolving facility ( “Revolving Facility”) maturing in 2027. |
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| ● | A new Union & Collective Bargaining Agreement (“CBA”) at Camino Rojo obtained 100% employee approval during the quarter and was formally ratified in early October. The agreement is valid for two years. |
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| ● | Inaugural Sustainability Report for the year end 2022 published. |
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^1^Non-GAAP measure. Please refer to section VI - NON-GAAP MEASURES of this MD&A for a reconciliation of this measure to the most comparable figures presented in our financial statements.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| Operating & Financial Results | **** | | **** | Q4 2023 | **** | 2023 | ||
| Gold production | | ounces | | | 34,484 | | | 121,877 |
| Gold sold | | ounces | | | 31,300 | | | 118,993 |
| Average realized gold price ^1^ | | per ounce | | $ | 1,974 | | $ | 1,941 |
| Cost of sales – operating cost | | million | | $ | 16.4 | | $ | 57.7 |
| Cash cost per ounce ^1^ | | per ounce | | $ | 536 | | $ | 506 |
| All-in sustaining cost per ounce ^1^ | | per ounce | | $ | 802 | | $ | 736 |
| | | | | | | | | |
| Revenue | | million | | $ | 62.9 | | $ | 233.6 |
| Net income (loss) | | million | | $ | (58.4) | | $ | (27.0) |
| Earnings (loss) per share – basic | | $/share | | $ | (0.19) | | $ | (0.09) |
| | | | | | | | | |
| Adjusted earnings ^1^ | | million | | $ | 15.7 | | $ | 47.8 |
| Adjusted earnings per share ^1^ | | $/share | | $ | 0.05 | | $ | 0.15 |
| | | | | | | | | |
| Cash flow from operating activities before changes in non-cash working capital | | million | | $ | 24.7 | | $ | 68.9 |
| | | | | | | | | |
| Free cash flow ^1^ | | million | | $ | (8.2) | | $ | 23.6 |
| | | | | | | | | |
| | | | | December 31, | | December 31, | ||
| Financial position | | | | 2023 | | 2022 | ||
| Cash and cash equivalents | | million | | $ | 96.6 | | $ | 96.3 |
| Net cash (debt) ^1^ | | million | | $ | 8.3 | | $ | (49.5) |
^1^Non-GAAP measure. Please refer to section VI - NON-GAAP MEASURES of this MD&A for a reconciliation of this measure to the most comparable figures presented in our financial statements.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**III.**OUTLOOK AND UPCOMING MILESTONES
We remain focused on advancing the Company’s strategic objectives and near-term milestones, which include the following:
| ● | Maintaining robust health and safety protocols, to support the health of our employees and local communities. |
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| ● | Advancing our Multi-year Sustainability Strategy Towards 2030, with a clear path for our environmental, social and governance (ESG) ambitions. |
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| ● | Maintaining consistent performance at the Camino Rojo Oxide Mine and achieving 2024 annual gold production and AISC guidance of 110,000 to 120,000 ounces and $875-$975 per ounce of gold sold. |
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| ● | Continuing to advance project permitting activities at Camino Rojo and South Railroad. |
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| ● | Continuing to advance exploration and development activities at Camino Rojo Sulphides. |
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| ● | Continuing exploration and development programs across our portfolio: |
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| o | Camino Rojo Sulphides drilling program to support an underground mineral resource estimate and optimal development scenario. |
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| o | Camino Rojo regional exploration program to discover new mineral resources. |
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| o | South Railroad and Camino Rojo sulphide and oxide exploration programs to increase reserve and resource base and discover new deposits. |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**IV.**GUIDANCE
| A. | 2023 GUIDANCE COMPARISON |
|---|
On January 16, 2023, the Company announced its FY 2023 annual guidance, which included the outlook for production, operating costs, capital costs, and exploration spending at Camino Rojo, South Railroad and Cerro Quema. On October 16, 2023, the Company announced an increase in annual production guidance to 110,000 to 120,000 ounces from the previous 100,000 to 110,000 ounces. On November 13, 2023, the Company announced a decrease in AISC guidance for the full year 2023 of $700 to $800 per ounce of gold sold from the previous $750 to $850 per ounce of gold sold. The following table sets forth the revised guidance compared to the Company’s performance in 2023.
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | **** | | **** | 2023 Revised Guidance | **** | 2023 Actual | |
| Gold Production | | oz | | 110,000 – 120,000 | | 121,877 | |
| AISC ^1,2^ | | /oz Au sold | | 700 - 800 | | 736 | |
| Capital Expenditures ^2^ | | | | | |||
| Sustaining Capital Expenditures | | | | | |||
| Non-Sustaining Capital Expenditures | | | | ^3^ | |||
| Total Capital Expenditures | | | | | |||
| Exploration ^2^ | | | | | |||
| Mexico | | | | ^4^ | |||
| Panama | | | | | |||
| Nevada | | | | | |||
| Total Exploration | | | | | | ||
| Site Admin & Permitting Expenses (Nevada/Panama) | | | | | | ||
| Corporate G&A (excluding share based compensation) | | | | |
All values are in US Dollars.
| 1. | AISC is a non-GAAP measure. See section VI — NON-GAAP MEASURES of this MD&A for additional information. |
|---|---|
| 2. | Exchange rates used to forecast cost metrics in the guidance include MXN/USD of 20.0 and CAD/USD of 1.28. |
| --- | --- |
| 3. | The 2023 guidance for non-sustaining capital did not include exploration expenditures. The Company capitalized as non-sustaining $11.2 million related to the Camino Rojo Sulphide exploration program. |
| --- | --- |
| 4. | In 2023, $11.2 million in exploration expenditures were capitalized to non-sustaining and is not included in this number. |
| --- | --- |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
| B. | 2024 GUIDANCE |
|---|
For 2024, the Company expects production to be in the range of 110,000 to 120,000 ounces. The Company has a planned exploration spending of $34 million in 2024 of which $11.5 million is expected to be capitalized.
| | | | |
|---|---|---|---|
| | **** | | FY 2024 Guidance1 |
| Gold Production | | oz | 110,000 – 120,000 |
| Total Cash Cost (net of by-product) | | /oz Au sold | 625 - 725 |
| AISC ^2,3^ | | /oz Au sold | 875 - 975 |
| Capital Expenditures ^3^ | | ||
| Sustaining Capital Expenditures | | | |
| Property, plant and equipment / Leases | | | |
| Exploration - capitalized ^4^ | | | |
| Non-Sustaining Capital Expenditures | | | |
| Projects | | | |
| Exploration - capitalized ^4^ | | | |
| Exploration Expenses & Project Development (expensed) ^3^ | | | |
| Corporate G&A (incl. share-based comp.) | | |
All values are in US Dollars.
| 1. | The outlook constitutes forward-looking statements within the meaning of applicable securities legislation, see XVIII - CAUTIONARY NOTES of this MD&A regarding Forward-Looking Information. |
|---|---|
| 2. | AISC is a non-GAAP measure. See section VI — NON-GAAP MEASURES of this MD&A for additional information. |
| --- | --- |
| 3. | Exchange rates used to forecast cost metrics include MXN/USD of 18.0 and CAD/USD of 1.33. |
| --- | --- |
| 4. | Capitalized Exploration is defined as drilling and related costs for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body or converting mineralized material to proven and probable reserves are capitalized. |
| --- | --- |
AISC guidance for 2024 is $875 to $975 per ounce of gold sold. The increase in AISC over 2023 is due primarily to increased waste movement, sustaining capex, maintenance costs, price inflation, and an increase in G&A costs at corporate office. Sustaining capital expenditures include the planned heap leach pad expansion during the first half of the year ($12.5M), pit wells expansion project ($1.1M), and approximately $0.5 million of capitalized exploration cost to drill the near-pit oxide targets at Camino Rojo. The majority of exploration expenses is in Mexico, with the objective of testing regional targets and conducting Phase 3 drilling at the sulphides to better understand the underground scenario.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**V.**DISCUSSION OF OPERATIONS
| A. | CAMINO ROJO, MEXICO |
|---|
Camino Rojo is a gold-silver-lead-zinc deposit located in the Municipality of Mazapil, State of Zacatecas, Mexico, near the village of San Tiburcio. The project lies 190 kilometres northeast of the city of Zacatecas, 48 km south-southwest of the town of Concepción del Oro, Zacatecas, and 54 kilometres south-southeast of Newmont’s Peñasquito mine.
Refer to the Company’s filed annual information form dated March 19, 2024, for the year ended December 31, 2023 (the “Annual Information Form”), for historical context and project background.
CAMINO ROJO OPERATIONAL UPDATE
The Camino Rojo Oxide Mine achieved quarterly gold production of 34,484 ounces of gold in Q4 2023 at an average ore stacking rate of 18,998 tonnes per day. The average mining rate during the fourth quarter was 28,955 tonnes per day with a strip ratio of 0.43. The average grade of ore processed during the fourth quarter was 0.73 g/t gold, in line with our plan. Gold sold during Q4 2023 totaled 31,300 ounces, a record quarter for the Company.
Fourth quarter cash costs and AISC totaled $536 and $802 per ounce of gold sold, respectively.
Sustaining capital during the fourth quarter of 2023 totaled $3.6 million. This covered items such as the construction of a dome over the ore stockpile for dust control which is nearing completion, the construction of water wells, and IT network infrastructure.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
During the second half of 2023, we initiated a program to test the impact of reduced crushed size from P80 28mm to P80 23mm. The initial results of this test program were positive and resulted in higher gold recovery from the heap leach. Further testing will be conducted in 2024 to assess the extent of the positive impact of the reduced crush size on other ore types.
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| Camino Rojo Operating Highlights | **** | | **** | Q4 2023 | **** | 2023 | **** |
| Total Ore Mined | | tonnes | | 1,861,068 | | 7,436,960 | |
| Ore - processed | | tonnes | | 1,739,318 | | 6,832,106 | |
| Low Grade Ore – stockpiled | tonnes | 121,750 | 604,854 | | |||
| Waste Mined | tonnes | 802,824 | 4,161,591 | | |||
| Total Mined | tonnes | 2,663,892 | 11,598,551 | | |||
| Strip Ratio | w:o | 0.43 | 0.56 | | |||
| Total Ore Mined Gold Grade | g/t | 0.71 | 0.75 | | |||
| Ore – processed | g/t | 0.73 | 0.79 | | |||
| Low Grade Ore – stockpiled | g/t | 0.29 | 0.29 | | |||
| Processing | | | — | | |||
| Ore Crushed | tonnes | 1,863,145 | 7,394,079 | | |||
| Ore Stacked | tonnes | 1,747,816 | 7,005,694 | | |||
| Stacked Ore Gold Grade | g/t | 0.73 | 0.79 | | |||
| Gold Produced | oz | 34,484 | 121,877 | | |||
| Daily Stacking Rate – Average | tpd | 18,998 | 19,194 | | |||
| | | | | | | | |
| | | | At December 31, 2023 | | |||
| Total ROM Ore Stockpile* | tonnes | 2,718,603 | | ||||
| Total ROM Ore Stockpile Grade | g/t | 0.33 | |
* ROM ore stockpile includes mined ore not yet crushed, and low-grade stockpiles.
ENVIRONMENTAL AND PERMITTING
CHANGE IN LAND USE PERMIT
The Company’s layback agreement with Fresnillo (the “Layback Agreement”) provided the Company with access to the Layback Area. As a result, the project as described in the 2021 technical report titled “Unconstrained Feasibility Study NI 43-101 Technical Report on the Camino Rojo Gold Project, Municipality of Mazapil, Zacatecas, Mexico” dated effective January 11, 2021 (the “2021 Camino Rojo Report”) will require an additional Change of Land Use (in Spanish, Cambio de Uso de Suelo, or “CUS”) permit to allow for additional surface disturbances related to development of a pit layback onto lands not considered in the August 2019 CUS permit application. The application for the additional CUS permit was submitted to SEMARNAT in February 2023. In July 2023, the permit was declined for procedural reasons due to SEMARNAT’s internal process timelines. We expect to resubmit the additional CUS permit application in 2024.
ENVIRONMENTAL IMPACT STATEMENT
With respect to the Environmental Impact Statement (in Spanish, Manifesto de Impacto Ambiental, or “MIA”), the project described in the 2021 Camino Rojo Report requires a modification of the MIA permit to allow for the additional production related to the development of a pit layback onto lands not considered in the August 2019 permit application, which the Company submitted. In March 2022, the Company submitted a second modification of the MIA permit to allow for the open pit east-west expansion, as well as waste and low-grade ore stockpiles. In 2024, both MIA modifications were not approved by SEMARNAT. The Company is in discussion with SEMARNAT to obtain clarity on the reasons for the non-approvals. The Company will persist with its expansion applications into the next administration and, in the meantime, is in the process of appealing these decisions, The Company will refile a request for modification of the MIA in 2024 and does not expect these delays in receiving the requested amendments to have an impact on the 2024 production guidance. Page 10
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
EXPLORATION
The Camino Rojo land package is under-explored and its proximity to the large Camino Rojo mineralized system provides highly prospective exploration opportunities. Exploration on the project is somewhat challenging due to the presence of a thin alluvial soil and caliche cover restricting geochemical surface expressions, but the potential to discover mineralization is considered excellent. As such, we continue to conduct regional exploration at Camino Rojo.
In 2023, we continued to focus on increasing oxide resources and reserves, supporting advancement of the sulphide deposit development scenarios, and testing priority exploration targets to potentially make new satellite deposit discoveries. Near-mine work included the continuation of the north-to-south oriented infill drilling on the sulphide deposit, reducing north-to-south drill spacing to approximately 50m and overall drill spacing to approximately 25 to 35m. This additional drilling will support an updated resource estimate for the sulphide deposit. In addition, a portion of the 2023 drill program was designed to test the depth extension of the Camino Rojo sulphide deposit.
Regional exploration work in 2023 consisted of follow-up diamond drill core drilling at the Guanamero target, testing the southwest extension of structures controlling mineralization at the Camino Rojo deposit, and testing drill targets along regional structural trends.
CAMINO ROJO SULPHIDES
Historical drilling on the Camino Rojo Sulphides, conducted by the previous project owners, indicated the gold grade of the deposit to be widely disseminated and a large, open-pit mining scenario was the favored development pathway. A lower grade open pit development scenario would necessitate higher capital expenditures for a large processing facility, and extensive material handling. To understand if an alternative, more targeted, development approach was possible, the presence of higher grades had to be confirmed. It was interpreted that portions of the deposit were comprised of higher grade steep northwest dipping vein sets. To test for the higher grades and to confirm the geological model, Orla began drilling into the Camino Rojo Sulphides in the opposite (south) orientation of historical drilling. Since Q4 2020, three phases of drilling have been conducted with the results indicating the presence of continuous, higher-grade gold domains (>2g/t Au) which could be amenable to underground mining, allowing for a smaller processing facility and less material handling.
Over three distinct campaigns covering a total of 50,924 drill metres, the Camino Rojo Sulphide infill drill program, has consistently yielded impressive results setting the stage for an exciting year ahead. These results include numerous intercepts of greater than 2.0 grams of gold per tonne (g/t Au) over tens of metres (core length), resulting in grade-by-thickness factors exceeding 50 g/t gold per metre. The results also showed narrower intervals of 0.5 to 11.5 metres of gold intersections exceeding 10 g/t Au. Full drill results are available at www.orlamining.com.
Combining Orla’s drill holes, oriented from north to south, and historical drill holes oriented in the opposite direction, has decreased drill spacing to approximately 25-30 metres within the higher grade of the Camino Rojo Sulphides. The combined drilling has significantly improved the understanding of the primary controls on gold mineralization. This approach has also contributed to refining the geometry and size of higher-grade zones within the extensive mineralized envelope of the sulphide deposit.
A preliminary underground resource estimate on the Camino Rojo Sulphides is anticipated to be completed in the second half of 2024. Metallurgy evaluation on the recent phase of Camino Rojo sulphide infill drilling is expected to continue throughout 2024.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
For additional details, please see the Company’s press releases dated January 25, 2024 (Orla Mining Provides an Update on Infill Drilling at Camino Rojo Sulphides Deposit with Multiple Highly Positive Drill Intersections) and February 7, 2024 (Orla Mining Concludes 2023 Camino Rojo Sulphides Infill Program with Strong Results).
CAMINO ROJO EXTENSIONS
Orla Mining has confirmed and encountered sulphide mineralization extending beyond the established open pit mineral resource boundaries at Camino Rojo. This drilling and mineralization is building on an updated geological model and the success of the previously reported CRSX22-15C hole drilled 200 metres down-plunge from the existing resources.
The impressive intercepts, both historical and recent, justified the execution of a new drill section in 2023, targeting 450 metres down-plunge from the existing resources, along the dike zone structure. This significant step-out drilling initiative consisted of drilling 2,400 metres, targeting the area around the positive historical intercept in hole CR12-366D (15.7 g/t Au, 29.0 g/t Ag, 0.73% Zn, 0.10 % Pb, 0.08% Cu (19.6 g/t AuEq) over 4.5 metres. This new drill section confirmed the presence of significant polymetallic semi-massive to massive sulphide mineralization.
Orla completed an initial metallurgical testing program in 2023, using drill core material from holes CRSX22-07 and CRSX22-08C which intersected polymetallic replacement-style mineralization during the 2022 program. The metallurgical results on material from CRSX-22-07 and CRSX-22-08C were positive with high gold recovery reported in both CIL bottle roll tests between 81-96% and rougher flotation on the CRSX-22-07 material produced a gold concentrate with 85-88% gold recovery. Open-circuit zinc cleaner tests on material from CRSX-22-07 produced a zinc concentrate with zinc grades of 52% and over 85% zinc recovery. These results suggest this new style of mineralization may be amenable to both standard cyanide processing and flotation. Orla plans to further explore these promising results through additional metallurgical test work in 2024.
For additional details, please see press release dated February 22, 2024 (Orla Mining Discovers New Style of Sulphide Mineralization at Camino Rojo Extending 0.5km Beyond Current Resources) and June 22, 2023 (Orla Mining Provides Update On Successful Drilling Program In Mexico).
LAYBACK AREA
Orla began drilling in the oxide pit Layback Area in late April to confirm and delineate mineralization on the Fresnillo property, located immediately north of and adjacent to the Camino Rojo Oxide Mine open pit. While historical drilling indicated that mineralization continues across the property boundary onto the Layback Area, no ounces from this area were previously included in the Camino Rojo mineral resource and mineral reserve estimates. The layback program, consisting of 3,425 metres in 24 drillholes, was completed in late May. The drill results from the layback program were consistent with expectations. These results are incorporated into the annual mineral reserve and mineral resource statement set forth in the Annual Information Form.
REGIONAL EXPLORATION
Regional exploration in 2023 consists of 13,535 metres of drilling to test priority exploration targets along the northeast-southwest mine trend and northwest-southeast regional structural trend. Orla resumed drilling at the Guanamero target area in early 2023, completing 7,464 metres of core drilling in nine drill holes in the first half of the year. In the second half of 2023, Orla has focused on drill testing other targets along the mine and regional trends. Target generation and development activities, including airborne drone magnetic and ground gravity geophysical surveys, geochemical sampling, and mechanical trenching were also completed in 2023.
In 2024, regional exploration efforts will continue to drill test priority drill targets along the northeast-southwest mine trend and northwest-southeast regional trend. In addition to drill testing, target generation and development activities will continue.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
SUSTAINABILITY
At Camino Rojo during Q4 2023, there were no community-related operational interruptions. At the end of Q4 2023, 100% of Camino Rojo’s direct employees were Mexican nationals. The Company employs 65% of the employable workforce available from local communities.
The Company maintains and regularly updates its community, social relations, and environmental management program. The Community Environmental Monitoring Committee continues its participation in the quarterly water monitoring program and other environmental related activities. The Sustainability Risk Committee, which is comprised of members of the Company and community relations advisors, continues to hold monthly meetings. The Company’s community relations team continues to work with local communities to understand how the Company can best provide support.
Highlights of Q4 2023:
| ● | The CBA at Camino Rojo obtained 100% approval and was formalized in October 2023. The CBA is valid for a period of two years with an annual review of salaries and wages. |
|---|---|
| ● | Local Suppliers Development Program, initiated in the third quarter of 2023, focuses on fostering business growth in the immediate areas influenced by the Camino Rojo mine. This collaborative initiative involves the Company, the Government of Zacatecas, and the Mexican Center for Competitiveness. |
| --- | --- |
| ● | The Silver Helmet Award from Mexican Mining Chamber was awarded to the Company to celebrate the low accident record in open pit mining with less than 500 workers category. |
| --- | --- |
| ● | Orla was accepted as a signatory to the United Nations Global Compact, the largest network of private companies committed to adopting high standards on responsible investments in relation to ESG areas. |
| --- | --- |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
| B. | SOUTH RAILROAD PROJECT, NEVADA |
|---|
In August 2022, the Company acquired all the outstanding common shares of Gold Standard Ventures Corp. (“Gold Standard”), a publicly listed company that owned the South Railroad Project. The South Railroad Project is located along the Pinon mountain range, approximately 24 kilometers south-southeast of Carlin, Nevada, in the Railroad mining district.
Refer to the Annual Information Form for historical context and project background.
ENVIRONMENT AND PERMITTING
PERMITTING ACTIVITIES
We continue baseline environmental data collection to facilitate the environmental studies required to support development of the Environmental Impact Study, and the permitting process. Orla is currently expanding on this work to allow flexibility in project planning when working with the Bureau of Land Management (“BLM”) during the permitting process.
A Plan of Operations for the project was submitted in November 2020. In December 2020, the BLM determined that the plan was complete. The review and approval process for the Plan of Operations by the BLM constitutes a federal action under the National Environmental Policy Act (“NEPA”) and BLM regulations. The BLM is required to comply with the NEPA, and the BLM has determined that an Environmental Impact Statement (“EIS”) is required. A NEPA contractor was selected in August 2021 which commenced work the following month. The BLM will publish the Notice of Intent in the Federal Register to officially commence the NEPA process. The NEPA process involves public scoping, the preparation of the EIS, and culminates in the BLM publishing a Record of Decision for the project. The South Railroad Project will also require an Individual Section 404 Permit from the United States Army Corps of Engineers, and this agency will be a cooperating agency on the NEPA documents.
We expect the BLM to file the Notice of Intent in the Federal Register in 2024. Once the Notice of Intent is filed, public scoping meetings can commence in conjunction with the development of the EIS. SWCA Environmental Consultants have been engaged to manage the EIS process on behalf of the BLM.
DETAILED DESIGN WORK AND AWARDING OF THE EPCM CONTRACT
We anticipate awarding the Engineering, Procurement & Construction Management contract for the South Railroad Project following the filing of the Notice of Intent by the BLM. Detailed engineering and design work could then commence in preparation for a construction decision following the conclusion of the NEPA process and receipt of the Record of Decision document.
EXPLORATION
The South Railroad Project is a prospective land package for the discovery of additional Carlin- and associated low sulfidation-type gold mineralization outside the already defined gold resources and reserves at the Pinion and Dark Star deposits. The potential for definition of additional oxide resources is considered very good. As such, we continue to conduct near-deposit and regional exploration at the South Railroad Project.
In 2023, geological modelling and metallurgical testing were completed for target areas drilled in 2022. In addition, Orla drill tested multiple oxide and sulphide exploration targets, including the extension of known mineralization (deposits) and newly developed targets supported by geology, geochemistry, and geophysical data. Key near-deposit exploration targets drilled in 2023 include Dark Star, Pinon SB, and North Bullion. Exploration drilling was also completed to test the possible extensions of gold mineralization at Jasperoid Wash, Dixie, and POD satellite deposits. Selected early-stage drill targets were also drill tested.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
Orla’s 2024 exploration program at South Railroad includes approximately 13,000 m in exploration drilling. Exploration drilling in 2024 will continue near-deposit exploration to potentially grow known deposits. Regional exploration will drill test selected exploration targets to assess the potential for additional satellite deposits, including Carlin- epithermal- and skarn-type gold and base metal mineralization. Geological and geochemical field work will also be completed to develop and advance early-stage targets to the drill-stage across the >25 km strike length of the property.
SUSTAINABILITY
In Q4 2023, the South Railroad Project increased its stakeholder engagement and local knowledge of the project by hosting community meetings to provide introductions and a project overview to Elko County community leaders. The site conducted meetings with BLM officials to increase the project’s understanding. The Company provided financial support to the Elko Cancer Network, the Geologic Society of Nevada, the Veterans Day Ball, local foster children, and others, providing needed support to local organizations and community members. The site continues participating in South Fork Band Council meetings, and volunteering with Communities in schools to deliver weekend meal packages to students.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
| C. | OTHER PROJECTS - CERRO QUEMA PROJECT, PANAMA |
|---|
The Cerro Quema Project is located on the Azuero Peninsula in the Los Santos Province of southwestern Panama, about 45 km southwest of the city of Chitre. The project includes a pre-feasibility-stage, open-pit, heap leach gold project, a copper-gold sulphide resource, and various exploration targets.
The Company completed its exploration drilling at the Cerro Quema Project in the first half of 2023, following which exploration and operational activities were ended.
In May 2023, the Ministry of Environment conducted a site inspection of the Cerro Quema Project. As a result of the positive site inspection review, the Category 3 Environmental & Social Impact Assessment (“ESIA”) technical aspects were approved. On May 28, 2023, Orla received the resolution approving the ESIA and commenced report preparation and data collection to fulfill the requirements established by the resolution.
On October 27, 2023, Panama’s President, Laurentino Cortizo Cohen, signed Executive Decree No. 23/2023 (“Decree 23-2023”). Decree 23-2023 (i) banned the granting of new concessions for the exploration, extraction, transportation and exploitation of metal mining in Panama, (ii) rejected all pending requests for the granting of new concessions for the exploration, extraction, transport and exploitation of metal mining, and (iii) ordered MICI to dispose of the files within three months of the passing of the Executive Decree. On November 3, 2023, the National Assembly of Panama passed Law 407, which instituted a moratorium on granting, renewing, or extending concessions for the exploration, extraction, transportation or exploitation of metal mining in Panama. On December 15, 2023, Minera Cerro Quema, S.A. (“MCQSA”), the Company’s subsidiary that holds the Cerro Quema Project, received three resolutions from the Panamanian Ministry of Commerce and Industry (“MICI”). The resolutions rejected the request for extension for the three mining concessions comprising the Cerro Quema Project, retroactively declared the concessions canceled, and declared the area comprising the concessions to be a reserve area under the Panamanian mining code. Under the Panamanian mining code, MICI is prohibited from granting mining concessions for exploration or extraction on a reserve area. On December 26, 2023, MCQSA filed requests for reconsideration of MICI’s decisions. On March 11, 2024, MICI rejected the requests for reconsideration.
The Company does not expect to expend additional funds on developing the Cerro Quema Project until it has greater certainty with respect to its mining concessions, as well as the fiscal and legal stability in Panama. The Company is exploring all legal remedies available to protect its historical investments and potentially unlock additional value for its stakeholders. The Company intends to file a Notice of Intent to Arbitrate under the Canada-Panama Free Trade Agreement (the “FTA”). The Notice of Intent facilitates consultations between the Government of Panama and the Company. In the event that such consultations are unsuccessful, the Company expects to proceed to file a Request for Arbitration.
As a result of the cancellation of the mining concessions comprising the Cerro Quema Project, we recognized an impairment of the carrying value of the asset of $72.4 million in our financial statements for the year ended December 31, 2023.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**VI.**NON-GAAP MEASURES
We have included herein certain performance measures (“non-GAAP measures”) which are not specified, defined, or determined under generally accepted accounting principles (“GAAP”). These non-GAAP measures are common performance measures in the gold mining industry, but because they do not have any mandated standardized definitions, they may not be comparable to similar measures presented by other issuers. Accordingly, we use such measures to provide additional information and you should not consider them in isolation or as a substitute for measures of performance prepared in accordance with GAAP. In this section, all currency figures in tables are in thousands, except per-share and per-ounce amounts.
AVERAGE REALIZED GOLD PRICE
Average realized gold price per ounce sold is calculated by dividing gold sales proceeds received by the Company for the relevant period by the ounces of gold sold. The Company believes the measure is useful in understanding the gold price realized by the Company throughout the period.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| AVERAGE REALIZED GOLD PRICE | **** | Q4 2023 | Q4 2022 | **** | 2023 | 2022 | ||||||
| Revenue | | $ | 62,946 | | $ | 56,758 | | $ | 233,643 | | $ | 193,230 |
| Silver sales | | | (1,166) | | (229) | | | (2,688) | | (836) | ||
| Gold sales | | 61,780 | | 56,529 | | 230,955 | | 192,394 | ||||
| Ounces of gold sold | | 31,300 | | 32,438 | | 118,993 | | 107,502 | ||||
| AVERAGE REALIZED GOLD PRICE | | $ | 1,974 | | $ | 1,743 | | $ | 1,941 | | $ | 1,790 |
NET CASH (DEBT)
Net cash (debt) is calculated as cash and cash equivalents and short-term investments less total debt adjusted for unamortized deferred financing charges at the end of the reporting period. This measure is used by management to measure the Company’s debt leverage. The Company believes that in addition to conventional measures prepared in accordance with IFRS, net cash (debt) is useful to evaluate the Company’s leverage and is also a key metric in determining the cost of debt.
| | | | | | | |
|---|---|---|---|---|---|---|
| NET CASH (DEBT) | **** | December 31, 2023 | **** | December 31, 2022 | ||
| Cash and cash equivalents | | $ | 96,632 | | $ | 96,278 |
| Less: Current portion of long term debt | | | — | | | (45,000) |
| Less: Long term debt | | (88,350) | | (100,795) | ||
| NET CASH (DEBT) | | $ | 8,282 | | $ | (49,517) |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
ADJUSTED EARNINGS AND ADJUSTED EARNINGS PER SHARE
Adjusted earnings excludes deferred taxes, unrealized foreign exchange, changes in fair values of financial instruments, impairments and reversals due to net realizable values, restructuring and severance, and other items which are significant but not reflective of the underlying operational performance of the Company. We believe these measures are useful to market participants because they are important indicators of the strength of our operations and the performance of our core business. With the addition of performance share units (“PSUs”) at the end of Q1 2023, we expect greater volatility in share-based payments expense going forward. Accordingly, we have excluded the effect of these PSU’s in our calculation of adjusted earnings.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ADJUSTED EARNINGS | **** | Q4 2023 | Q4 2022 | 2023 | 2022 | |||||||
| Net income (loss) for the period | | $ | (58,442) | | $ | 18,690 | | $ | (27,010) | | $ | 45,770 |
| Impairment and derecognition of exploration properties | | | 72,743 | | | — | | | 72,743 | | | — |
| Unrealized foreign exchange loss (gain) | | | 1,300 | | | 1,971 | | | (843) | | | (1,862) |
| Loss on extinguishment of Credit Facility | | — | | — | | 1,547 | | 13,219 | ||||
| Accretion of deferred revenue | | | 123 | | | — | | | 676 | | | — |
| Share based compensation related to PSUs | | | (22) | | | — | | | 121 | | | — |
| Other | | | — | | | — | | | 517 | | | — |
| ADJUSTED EARNINGS | | $ | 15,702 | | $ | 20,661 | | $ | 47,751 | | $ | 57,127 |
| | | | | | | | | | | | | |
| Millions of shares outstanding – basic | | | 314.5 | | | 304.5 | | | 311.5 | | | 272.2 |
| Adjusted earnings per share – basic | | $ | 0.05 | | $ | 0.07 | | $ | 0.15 | | $ | 0.21 |
Companies may choose to expense or capitalize their exploration expenditures. We expense our exploration costs based on our accounting policy. To assist readers in comparing against those companies which capitalize their exploration costs, we note that included within Orla’s net income (loss) for each period are exploration costs which were expensed, as follows:
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Q4 2023 | Q4 2022 | 2023 | 2022 | ||||||||
| Exploration & evaluation expense | | $ | 9,316 | | $ | 5,605 | | $ | 34,616 | | $ | 18,939 |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
FREE CASH FLOW
The Company believes market participants use Free Cash Flow to evaluate the Company’s operating cash flow capacity to meet non-discretionary outflows of cash. Free Cash Flow is not meant to be a substitute for the cash flow information presented in accordance with IFRS. Free Cash Flow is calculated as the sum of cash flow from operating activities and cash flow from investing activities, excluding certain unusual transactions.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| FREE CASH FLOW | **** | Q4 2023 | Q4 2022 | 2023 | 2022 | |||||||
| Cash flow from operating activities | | $ | 21,903 | | $ | 31,836 | | $ | 65,296 | | $ | 95,311 |
| Cash flow from investing activities | | | (30,062) | | | (20,188) | | | (41,728) | | | (13,356) |
| FREE CASH FLOW | | $ | (8,159) | | $ | 11,648 | | $ | 23,568 | | $ | 81,955 |
| | | | | | | | | | | | | |
| Millions of shares outstanding – basic | | | 314.5 | | | 304.5 | | | 311.5 | | | 272.2 |
| Free cash flow per share – basic | | $ | (0.03) | | $ | 0.04 | | $ | 0.08 | | $ | 0.30 |
In Q4 2023, cash flow from investing activities included the final payment of $22.8 million to Fresnillo plc in respect of the Layback Agreement.
CASH COST AND ALL-IN SUSTAINING COST
The Company calculates cash cost per ounce by dividing the sum of operating costs and royalty costs, net of by-product silver credits, by ounces of gold sold. Management believes that this measure is useful to market participants in assessing operating performance.
The Company has provided an AISC performance measure that reflects all the expenditures that are required to produce an ounce of gold from operations. While there is no standardized meaning of the measure across the industry, the Company’s definition conforms to the all-in sustaining cost definition as set out by the World Gold Council in its guidance dated November 14, 2018. Orla believes that this measure is useful to market participants in assessing operating performance and the Company’s ability to generate free cash flow from current operations.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
Figures are presented only from April 1, 2022, as the Camino Rojo Oxide Mine commenced commercial production on that date.
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CASH COST | **** | Q4 2023 | Q4 2022 | 2023 | 2022 | |||||||
| Cost of sales – operating costs | | $ | 16,383 | | $ | 13,482 | | $ | 57,672 | | $ | 36,231 |
| Royalties | | 1,562 | | 1,439 | | 5,795 | | 3,755 | ||||
| Silver sales | | (1,166) | | (229) | | (2,688) | | (617) | ||||
| Other | | | — | | | — | | | (517) | | | (503) |
| CASH COST | | $ | 16,779 | | $ | 14,692 | | $ | 60,262 | | $ | 38,866 |
| | | | | | | | | | | | | |
| Ounces sold | | 31,300 | | 32,438 | | 118,993 | | 86,618 | ||||
| Cash cost per ounce sold | | | 536 | | $ | 453 | | | 506 | | $ | 449 |
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALL-IN SUSTAINING COST | **** | Q4 2023 | Q4 2022 | 2023 | 2022 | |||||||
| Cash cost, as above | | $ | 16,779 | | $ | 14,692 | | $ | 60,262 | | $ | 38,866 |
| General and administrative expenses | | | 3,913 | | 2,741 | | 13,408 | | 7,634 | |||
| Share based payments | | 558 | | 526 | | 2,818 | | 1,582 | ||||
| Accretion of site closure provisions | | 127 | | 160 | | 521 | | 395 | ||||
| Amortization of capitalized site closure costs | | (64) | | 105 | | 324 | | 448 | ||||
| Sustaining capital | | 3,590 | | 2,116 | | 7,935 | | 3,533 | ||||
| Sustaining capitalized exploration | | | — | | | — | | | 1,476 | | | — |
| Lease payments | | 214 | | 216 | | 820 | | 442 | ||||
| ALL-IN SUSTAINING COST | | $ | 25,117 | | $ | 20,556 | | $ | 87,564 | | $ | 52,900 |
| | | | | | | | | | | | | |
| Ounces sold | | 31,300 | | 32,438 | | 118,993 | | 86,618 | ||||
| All-in sustaining cost per ounce sold | | $ | 802 | | $ | 634 | | $ | 736 | | $ | 611 |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**VII.**SUMMARY OF QUARTERLY RESULTS
The figures in the following table are based on the unaudited consolidated financial statements of the Company which were prepared in accordance with IFRS.
| | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| thousands | Q4 2023 | **** | Q3 2023 | **** | Q2 2023 | **** | Q1 2023 | **** | Q4 2022 | **** | Q3 2022 | **** | Q2 2022 | **** | Q1 2022 | ||||||||
| Revenue | $ | 62,946 | | $ | 60,294 | | $ | 59,272 | | $ | 51,131 | | $ | 56,758 | | $ | 49,030 | | $ | 47,797 | | $ | 39,645 |
| Cost of sales | | (26,339) | | (25,092) | | (21,733) | | (18,952) | | (18,572) | | (19,473) | | (16,894) | | (10,430) | |||||||
| | | 36,607 | | 35,202 | | 37,539 | | 32,179 | | 38,186 | | 29,557 | | 30,903 | | 29,215 | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Exploration expense | | (9,316) | | (11,233) | | (7,201) | | (6,866) | | (5,605) | | (8,327) | | (2,541) | | (2,466) | |||||||
| Office and administrative | | (1,079) | | (929) | | (834) | | (710) | | (805) | | (769) | | (714) | | (633) | |||||||
| Professional fees | | (1,255) | | (550) | | (516) | | (397) | | (555) | | (357) | | (875) | | (450) | |||||||
| Regulatory and transfer agent | | (18) | | (37) | | (110) | | (286) | | (17) | | (44) | | (42) | | (198) | |||||||
| Salaries and wages | | (1,561) | | (1,607) | | (1,647) | | (1,872) | | (1,364) | | (1,172) | | (1,256) | | (1,662) | |||||||
| Depreciation | | (149) | | (117) | | (120) | | (118) | | (115) | | (85) | | (41) | | (36) | |||||||
| Share based payments | | (652) | | (656) | | (806) | | (1,107) | | (526) | | (518) | | (538) | | (865) | |||||||
| Foreign exchange and other | | (608) | | (340) | | (1,240) | | (802) | | (1,856) | | 3,846 | | (10,791) | | (1,363) | |||||||
| Impairment of exploration properties | | (72,743) | | — | | — | | — | | — | | — | | — | | — | |||||||
| Interest and finance costs | | (870) | | (1,999) | | (1,466) | | (2,116) | | (2,018) | | (2,304) | | (2,076) | | (325) | |||||||
| Tax expense | | (6,798) | | (12,364) | | (10,772) | | (4,670) | | (6,635) | | (10,932) | | (12,626) | | (2,435) | |||||||
| Net income (loss) | | (58,442) | | 5,370 | | 12,827 | | 13,235 | | 18,690 | | 8,895 | | (597) | | 18,782 | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) per share (basic) | $ | (0.19) | | $ | 0.02 | | $ | 0.04 | | $ | 0.04 | | $ | 0.06 | | $ | 0.03 | | $ | (0.00) | | $ | 0.08 |
| Net income (loss) per share (diluted) | $ | (0.19) | | $ | 0.02 | | $ | 0.04 | | $ | 0.04 | | $ | 0.06 | | $ | 0.03 | | $ | (0.00) | | $ | 0.07 |
All values are in US Dollars.
REVENUE AND COST OF SALES
The Camino Rojo Oxide Mine was under construction throughout 2021. We declared commercial production effective April 1, 2022. Upon commercial production, we commenced recording depletion, depreciation and amortization (“DD&A”) on the mine and related plant and equipment.
EXPLORATION EXPENSE
In Q3 2022, we acquired the South Railroad and Lewis projects, and continued significant exploration and evaluation activities at South Railroad. This has caused the increase in exploration expense after Q2 2022. We also continued further exploration activities at Camino Rojo and Cerro Quema during 2022 and into 2023.
ADMINISTRATIVE COSTS
Administrative costs and professional fees have trended with the level of activity of the Company, and with major transactions such as the Company’s refinancing of the Project Loan (as defined below) and the acquisition of South Railroad in 2022.
SALARIES AND WAGES
Salaries have generally increased from 2022 to 2023 as a result of growth during the construction and operation phases at Camino Rojo and of the Company as a whole.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
SHARE BASED PAYMENTS
Share-based payments expense is generally related to the number of stock options, restricted share units (“RSUs”), deferred share units (“DSUs”), and PSUs vesting during the quarter. The grants typically occur during the first quarter of each year; consequently, those quarters tend to be greater than the others as a percentage of awards and grants vest (and are therefore expensed) immediately.
INTEREST AND FINANCE COSTS
From December 2019 until April 2022, the Company had project financing outstanding of $125 million (the “Project Loan”), the interest on which was capitalized prior to commencement of operations.
In April 2022, we refinanced the Project Loan and replaced it with a credit facility of $150 million (the “Credit Facility”), of which $130 million was drawn down upon closing of the refinancing. In January 2021, we acquired the Layback Area, which included obligations of $37.8 million (the “Fresnillo obligations”) bearing interest at 5%. This interest was capitalized and therefore had no effect on earnings from December 1, 2020 to March 31, 2022. In August 2023, we amended the Credit Facility to an entirely revolving facility (“Revolving Facility”) of $150 million (of which we had $88 million outstanding at year end).
FOREIGN EXCHANGE
We funded the construction of the Camino Rojo Oxide Mine by funding US-dollar-denominated loans from the Canadian parent company to our Mexican operating subsidiary. The intercompany loan balance at year end 2023 was US$121 million, and since the Canadian parent is Canadian-dollar functional, this leads to foreign exchange gains or losses arising from changes in the USD-CAD exchange rate. Our Mexican operating subsidiary is US-dollar functional; consequently, no offsetting foreign exchange was recorded. This has been the single largest contributor to volatility in our foreign exchange.
OTHER EXPENSES
In Q2 2022, we repaid the then-existing Project Loan in its entirety, ahead of its expiry date. At that time, an amount of $10.7 million, mainly related to the value of the warrants issued in conjunction with the Project Loan, remained unamortized, which we then expensed immediately, along with the $2.5 million early repayment fee paid.
In Q3 2023, we amended the Credit Facility and replaced it the Revolving Facility. Unamortized transactions costs and expenses of the amendment totaled $1.5 million, which we expensed immediately during the quarter.
In Q4 2023, we recorded an impairment of $72.4 million on our Cerro Quema project following the passing of Law 407 and the cancellation of our mining concessions in Panama.
TAX EXPENSE
During 2022, we accrued income taxes and recorded deferred taxes each quarter. In Q1 2023, we paid income taxes and mining duties in respect of the 2022 fiscal year. In Q2 2023 we commenced making mandatory monthly instalment payments in respect of our Mexican tax liabilities. The increase in effective tax rate from 2022 to 2023 results from the benefit of pre-construction loss carryforwards which were utilized and recognized in 2022, as well as the effect of the impairment recorded on our Cerro Quema project.
In common with all other mining companies operating in Mexico, the Company is subject to a 7.5% Special Mining Duty (“SMD”) on earnings from mining operations, in addition to corporate income tax.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**VIII.**THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2023
The following commentaries are based on accompanying (i) audited consolidated financial statements for the year ended December 31, 2023, (ii) unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2023, and (iii) audited consolidated financial statements for the year ended December 31, 2022, each of which were prepared in accordance with IFRS.
BALANCE SHEET
Comparison of balance sheets at December 31, 2023 to December 31, 2022.
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | Dec 31, 2023 | Dec 31, 2022 | Commentary | |||||
| Cash | | $ | 96,632 | | $ | 96,278 | | Significant inflows are operating earnings and the issuance of common shares, partly offset by tax payments, purchases of PP&E and capitalized exploration and payment pursuant to the Layback Agreement, repayment of principal on our credit facilities, and related interest. |
| Other current assets | | | 48,543 | | | 36,584 | | Primarily due to the reclassification of Mexican value added taxes recoverable (from long term to current) and a general increase in inventories. |
| Property, plant and equipment | | 211,719 | | 224,416 | Decrease was primarily due to depletion and depreciation and change in site closure provision, partly offset by net additions. | |||
| Exploration and evaluation properties | | 170,000 | | 242,743 | Decrease was due to the impairment recorded at Cerro Quema project in Panama. | |||
| Other long term assets | | 8,884 | | 13,795 | Decrease was primarily due to the reclassification of Mexican value added taxes recoverable to current assets. | |||
| Current liabilities, excluding current portion of long term debt | | 28,658 | | 52,777 | Decrease is driven substantially by the payment in 2023 of income taxes which had been accrued at the 2022 year end. We commenced paying monthly tax instalments during 2023. | |||
| Long term debt (current + long term) | | 88,350 | | 145,795 | During the year, we repaid an aggregate of $36.1 million of principal related to the Credit Facility and Revolving Facility and fully paid off the remaining Fresnillo obligation of $22.8 million. | |||
| Other long term liabilities | | 18,229 | | 18,260 | |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
INCOME FOR THE QUARTER
COMPARISON TO LAST QUARTER (Q4 2023 VS Q3 2023)
The number of gold ounces produced was higher in Q4 2023 than in Q3 2023 primarily due to higher tonnes of ore mined and higher recovery.
The average realized price was higher in Q4 2023 than in Q3 2023 ($1,974 vs $1,921). Revenues were higher in Q4 2023 than in Q3 2023 due to more ounces being sold, and at a higher price.
The cost of sales for Q4 2023 was generally consistent compared to Q3 2023 based on the number of gold ounces sold.
The increase in general and administrative expenses was driven primarily by costs associated with implementation of Sarbanes Oxley internal control compliance and reporting requirements.
Our exploration activities were lower in Q4 2023 than in Q3 2023 mainly due to a decrease in drilling activities at Nevada.
Interest expense was lower in Q4 2023 than Q3 2023 primarily due to principal repayments made during the quarter resulting to lower debt and associated interest.
COMPARISON TO SAME QUARTER LAST YEAR (Q4 2023 VS Q4 2022)
The higher revenues in Q4 2023 vs Q4 2022 were driven by increased ounces sold at a higher price ($1,974 vs $1,743).
The increase in general and administrative expenses was driven primarily by staffing increases over the prior year as a result of increased activity of the Company and costs associated with implementation of Sarbanes Oxley internal control reporting requirements.
The increase in exploration and evaluation expenses over Q4 2022 was primarily due to the timing of capitalization of sulphide exploration costs at Camino Rojo in Q4 2022. Site administration costs at South Railroad were also higher this quarter.
Interest income is higher in Q4 2023 due to higher interest rates and higher average cash balances on hand. Interest expense was lower in Q4 2023 than Q4 2022 primarily due to principal repayments made during the year resulting in lower debt and associated interest.
INCOME FOR THE YEAR
COMPARISON TO LAST YEAR (2023 VS 2022)
| ● | Gold ounces sold in 2023 were 118,993 oz vs 107,502 in 2022. Average price was $1,941/oz in 2023 from $1,790 per oz in 2022 as spot gold price increased during the year. |
|---|---|
| ● | Cash costs per ounce increased compared to the prior year due primarily to labour rate increases (arising from a new union contract) and higher reagent and maintenance costs. |
| --- | --- |
| ● | Earnings from mining operations total $141.5 million in 2023 compared to $127.9 million in 2022. |
| --- | --- |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
CASH FLOWS
Comparison of twelve months ended December 31, 2023 to twelve months ended December 31, 2022.
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | Twelve months ended | | | ||||
| | | December 31 | | Commentary | ||||
| | 2023 | 2022 | | |||||
| Cash flow from operating activities | | $ | 65,296 | | $ | 95,311 | The decrease is driven substantially by the payment of income taxes in respect of 2022 and instalments in respect of 2023, offset partly by an increase in earnings from mining operations. | |
| Cash flow from investing activities | | (41,728) | | (13,356) | The comparative figure from Q4 2022 included a lump-sum VAT tax refund of $18.5 million. | |||
| Cash flow from financing activities | | (23,131) | | (5,379) | Current year includes the net payment of $36.1 million of principal and $11.8 million of interest on our credit facilities offset partly by proceeds from issuance of common shares and from the exercise of options and warrants. |
SELECT ANNUAL INFORMATION
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | 2023 | **** | 2022 | **** | 2021 |
| | **** | 000’s | **** | 000’s | **** | 000’s |
| Revenue | | | | |||
| Net income (loss) | | | | |||
| Basic income (loss) per share | | | | |||
| Diluted income (loss) per share | | | | |||
| Total assets | | | | |||
| Total non-current financial liabilities | | | |
All values are in US Dollars.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**IX.**LIQUIDITY
As at December 31, 2023, the Company had cash and cash equivalents of $96.6 million and positive working capital of $116.5 million. During the three and twelve months ended December 31, 2023, the Company generated revenues of $62.9 million and $233.6 million, respectively.
At December 31, 2023 and at the date of this MD&A, the Company had a Revolving Facility loan balance outstanding of $88.4 million with a maturity date of August 27, 2027.
EXPECTED SOURCES OF CASH
We expect to fund the operating costs and the operating and strategic objectives of the Company over the next twelve months with existing cash on hand and metal sales, although we may also receive proceeds from exercises of options and warrants over that time.
MEXICAN VALUE ADDED TAXES RECOVERABLE (“VAT”)
Our Mexican entities pay value added taxes on certain goods and services we purchase in country. Value added taxes paid in Mexico are fully recoverable. VAT recovery returns in Mexico are subject to complex filing requirements and detailed audit or review by the fiscal authorities. Consequently, the amount and timing of refunds is uncertain.
A summary of the claims outstanding at December 31, 2023 for Mexican VAT paid each year (table expressed in $ 000’s):
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Mexican VAT paid | Mexican VAT paid | | | | | ||||||
| | | on acquisition of | | on acquisition of | | Construction and | | | | |||
| Arising in the year | | Camino Rojo | | Layback Area | | operations | | Total | ||||
| 2017 | | $ | 4,236 | | $ | — | | $ | — | | $ | 4,236 |
| 2018 | | | — | | | — | | | 103 | | | 103 |
| 2019 | | — | | — | | 138 | | 138 | ||||
| 2020 | | — | | — | | 79 | | 79 | ||||
| 2021 | | — | | 826 | | 126 | | 952 | ||||
| 2022 | | — | | — | | 305 | | 305 | ||||
| 2023 | | | — | | | — | | | 10,513 | | | 10,513 |
| Total Mexican VAT recoverable | | $ | 4,236 | | | 826 | | $ | 11,264 | | $ | 16,326 |
CONTRACTUAL OBLIGATIONS
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual obligations | | Payments due by period | |||||||||||||
| As at December 31, 2023 | | | | | 12 months or | | 13 months to | | 37 months to | | After 60 | ||||
| (thousands of US dollars) | Total | less | 36 months | 60 months | months | ||||||||||
| Purchase commitments | $ | 3,698 | $ | 3,698 | $ | — | $ | — | $ | — | |||||
| Trade payables | | 8,219 | | 8,219 | | — | | — | | — | |||||
| Accrued liabilities | | 9,541 | | 9,541 | | — | | — | | — | |||||
| Lease commitments | | 3,143 | | 1,012 | | 1,210 | | 921 | | — | |||||
| Revolving Facility and related interest | | 114,455 | | 7,185 | | 14,253 | | 93,017 | | — | |||||
| Total contractual obligations | | $ | 139,056 | | $ | 29,655 | | $ | 15,463 | | $ | 93,938 | | $ | — |
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**X.**INTERNAL CONTROL OVER FINANCIAL REPORTING AND DISCLOSURE CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted by the Company under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in those rules, and include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted by the Company under U.S. and Canadian securities legislation is accumulated and communicated to management, including the CEO and CFO, as appropriate, to permit timely decisions regarding required disclosure.
Management, including the CEO and CFO, believe that any disclosure controls and procedures or internal controls over financial reporting, no matter how well conceived and operated can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected.
These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in the rules of the United States Securities and Exchange Commission and the Canadian Securities Administrators, as at December 31, 2023. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective as at December 31, 2023 as a result of the material weaknesses described below.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in the rules of the United States Securities and Exchange Commission and the Canadian Securities Administrators. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with IFRS as issued by the IASB.
The Company’s ICFR includes policies and procedures that:
| ● | are designed to provide reasonable assurance that accounting records are maintained that accurately and fairly reflect, in reasonable detail, the transactions and dispositions of assets of the Company; |
|---|---|
| ● | are designed to provide reasonable assurance that the Company’s receipts and expenditures are made in accordance with authorizations of management and the Company’s Directors; and |
| --- | --- |
| ● | are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements. |
| --- | --- |
The Company’s ICFR may not prevent or detect all misstatements because of inherent limitations. Additionally, projections of any evaluation of effectiveness for future periods are subject to the risk that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the Company’s policies and procedures.
Management assessed the effectiveness of the Company’s ICFR based on the criteria for effective internal control over financial reporting established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission (2013). Based on this evaluation, management concluded that the Company’s ICFR was not effective as at December 31, 2023, due to the material weaknesses in internal controls described below.
A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected.
It was determined during management’s assessment that management’s review controls at the Company’s Mexican operating subsidiary were not designed or operating effectively as at December 31, 2023. Specifically, there was insufficient (i) documentation to evidence the performance of multiple key controls, (ii) operation of management review controls at a level of precision necessary to identity all potentially material errors, and (iii) verification of the completeness and accuracy of the data used in the performance of controls. The foregoing also impacted the information used in executing the Company’s corporate oversight controls, causing some of them to operate ineffectively as at December 31, 2023. The Company considers this a material weakness in its ICFR
It was determined during management’s assessment that certain information technology general controls (“ITGCs”) were not designed or operating effectively as at December 31, 2023, in the areas of user access and change management over an IT system that supports the Company’s financial reporting process. This resulted in inadequate segregation of duties for its IT application controls. The automated and manual business process controls that are dependent on the affected ITGCs were also deemed to not be operating effectively as at December 31, 2023, because they had been impacted by the foregoing. The Company considers this a material weakness in its ICFR.
The above described material weaknesses impacted all of the significant classes of transactions of the Company. Page 28
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
To remediate these material weaknesses, the Company is instituting more detailed reviews and validation procedures for data used in financial reporting, with an emphasis on maintaining comprehensive documentation of these reviews. The Company is conducting extensive training sessions for mine personnel to underscore the importance of executing and evidencing their reviews to support the integrity of reported financial information. The Company is imposing additional restrictions on privileged access to its IT system, and will add and improve controls to enforce segregation of duties within its IT system. The Company is implementing additional change management systems, such as more extensive testing and formalized IT change authorizations. The Company is also implementing more controls to monitor, on an ongoing basis, changes and access to its IT system.
No material errors or fraud were identified in the consolidated annual financial statements as a result of the above-noted material weaknesses.
Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s ICFR, and has expressed their opinion in their report included with the Company’s annual consolidated financial statements.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this Annual Report, no changes occurred in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, other than the material weaknesses described above.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XI.**CAPITAL RESOURCES
DEBT
FRESNILLO OBLIGATIONS
Pursuant to the terms of the Layback Agreement, Fresnillo agreed to deferred payments of $62.8 million, which had been repaid in its entirety as of December 31, 2023. This amount bore interest at 5% per annum, payable quarterly.
CREDIT FACILITY
In April 2022, the Company entered into a credit facility consisting of a $100 million term facility and a $50 million revolving facility through a syndicate of lenders. In August 2023, the Credit Facility was extinguished in its entirety and the amounts due thereunder were transferred to a new $150 million Revolving Facility maturing in August 2027.
REVOLVING FACILITY
The $150 million Revolving Facility matures on August 27, 2027, of which the Company had drawn $113 million. During Q4 2023, the Company repaid $25 million and reduced the outstanding balance to $88 million.
The Revolving Facility can be increased to $200 million, subject to receipt of additional binding commitments and satisfaction of certain conditions precedent. The facility has a four-year term, with full repayment due upon maturity. The applicable interest rate for the Revolving Facility is based on the term Secured Overnight Financing Rate (“SOFR”), plus an applicable margin based on the Company’s leverage ratio at the end of each fiscal quarter. The undrawn portion of the Revolving Facility is subject to a standby fee. Interest is payable at the end of each interest period, or at least every three months. The Company may prepay all or any portion of the amounts owed under the Revolving Facility without penalty.
Refer to section IX - LIQUIDITY above for current outstanding amounts in respect of the Revolving Facility, and the notes in the accompanying audited consolidated financial statements for details on payments and accruals during the year.
EQUITY
The Company filed a base shelf prospectus on April 13, 2023, which is valid for 25 months.
As of the date of this MD&A, 28.3 million warrants remain outstanding, all of which have an exercise price of C$3.00 which is less than the market value of the underlying shares.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XII.**RELATED PARTY TRANSACTIONS
The Company’s related parties include “key management personnel”, whom we define as the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the Chief Sustainability Officer, the Senior Vice President Exploration, and members of the Board of Directors of the Company.
Other than compensation in the form of salaries or directors’ fees, and termination benefits and share based payments (options, RSUs, DSUs, PSUs, and bonus shares), there were no other material transactions with this group of individuals.
Compensation to key management personnel was as follows:
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Q4 2023 | **** | Q4 2022 | **** | 2023 | **** | 2022 | ||||
| Salaries and short term incentive plans | **** | $ | 377 | $ | 318 | $ | 3,439 | $ | 3,871 | |||
| Directors’ fees | | 101 | | 65 | 366 | | 291 | |||||
| Share based payments | | 385 | | 405 | 1,895 | | 1,987 | |||||
| | | $ | 863 | | $ | 788 | | $ | 5,700 | | $ | 6,149 |
In May 2023, Agnico Eagle Mines Limited (“Agnico Eagle”), a Canadian public company, subscribed for 3,987,241 common shares of the Company for proceeds of C$25,000,000 ($18,551,000). A director of the Company is a senior officer of Agnico Eagle.
During the period covered by this MD&A, and to the date of this MD&A, there are no other related party transactions or balances.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XIII.**OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements requiring disclosure under this section.
**XIV.**PROPOSED TRANSACTIONS
On February 25, 2024, the Company and Contact Gold Corp. (“Contact”) (a public company listed on the TSX Venture Exchange) entered into an arrangement agreement (the “Arrangement Agreement”) whereby the Company will acquire all of the issued and outstanding common shares of Contact (the “Contact Shares”) pursuant to a court-approved plan of arrangement (the “Transaction”).
Under the terms of the Arrangement Agreement, each holder of Contact Shares will receive, for each Contact Share held, 0.0063 of an Orla common share. The Arrangement Agreement includes certain customary provisions, including non-solicitation provisions and the payment of a break fee payable in certain circumstances, as well as certain representations, covenants and conditions which are customary for a transaction of this nature. The Transaction will be effected by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia), requiring Contact securityholder approval. In addition to court and securityholder approvals, the Transaction is subject to stock exchange approval and the satisfaction of certain other closing conditions customary in transactions of this nature. The Transaction is expected to close on or about April 29, 2024.
Consequently, we expect to issue approximately 2.2 million common shares of the Company in respect of Contact Shares under the Transaction.
As a result of this transaction, we expect that our total assets and total equity will increase by approximately $8 million and will not have a material effect on the earnings or cashflows of the Company during 2024.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XV.**CRITICAL ACCOUNTING ESTIMATES
In preparing the accompanying audited consolidated financial statements, we have made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates.
We review estimates and their underlying assumptions on an ongoing basis. Revisions to estimates are recognized prospectively.
Judgements, estimates, and assumptions that we have made in applying accounting policies that have the most significant effects on the amounts recognized in the accompanying audited consolidated financial statements include:
MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES
Mineral resource and mineral reserve estimates are estimates of the quantity of ore that can be economically extracted from the Company’s mining properties. Such estimates impact the financial statements in the following ways:
| ● | Mineral resource and mineral reserve estimates are key factors considered in determining whether technical feasibility and commercial viability of extracting a mineral resource are demonstrable which influences the classification of expenditure, |
|---|---|
| ● | The carrying value of assets may be affected due to changes in estimated mineral reserves and resources if the change is considered an indicator of impairment, |
| --- | --- |
| ● | Depreciation of producing mineral properties is affected by changes in reserve estimates, |
| --- | --- |
| ● | Site closure provisions may change where reserve estimate changes affect expectations about when such activities will occur and the associated cost of these activities. |
| --- | --- |
The mineral resource and mineral reserve estimates are based on information compiled by qualified persons within the meaning of NI 43-101. Such information includes geological and technical data on the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires complex geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs, along with geological assumptions and judgements made in estimating the size and grade of the ore body.
As the economic assumptions used may change and as additional geological information is produced during the operation of a mine, estimates of mineral resources and mineral reserves may change.
RECOVERABLE AMOUNT OF A MINING ASSET
Determining whether the recoverable amount of a mining asset is based on its fair value less costs of disposal or its value in use involves judgment. This includes assessing whether market transactions for similar assets are available and whether these transactions can be considered as basis for fair value, or whether the value in use calculation, which involves estimating future cash flows, is more appropriate.
Included with this are judgements about external factors, including changes in the legal, environmental, and political context in which the mine or potential mine operates.
In valuing land, estimates include per-hectare valuation rates based on permitted use, market conditions, topography, and other factors.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
VALUATION OF METAL-IN-PROCESS INVENTORY
The measurement of inventory, including the determination of its net realizable value (“NRV”), especially as it relates to metal production inventory involves the use of estimates.
NRV is calculated as the estimated price at the time of sale based on prevailing metal prices, less estimated future production costs to convert the inventory into saleable form and associated selling costs, discounted where applicable. In determining the value of metal on the leach pads, we make estimates of rock densities, tonnages, grades, and the recoverability of ore stacked on leach pads to estimate its value. Changes in these estimates can result in a change in carrying amounts of inventory, which could result in charges to cost of sales. The determination of forecast sales prices, recovery rates, grade, assumed contained metal in stockpiles, work-in-process and leach pad inventory and production and selling costs all requires significant assumptions that impact the carrying value of production inventories.
ASSET RETIREMENT AND SITE CLOSURE OBLIGATIONS
We make estimates and assumptions in determining the provisions for asset retirement and site closure. The estimates and assumptions include determining the amount and timing of future cash flows, inflation rates, and discount rates. The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including judgements of the extent of rehabilitation activities, technological changes, and regulatory changes.
Consequently, there could be significant adjustments to the site closure provision recorded, which would affect future financial position, results of operations, and changes in financial position. The provision is management’s best estimate of the present value of the future asset retirement and site closure obligation. Actual future expenditures may differ from the amounts currently provided.
FAIR VALUE MEASUREMENT
Management uses valuation techniques in measuring the fair value of mineral properties acquired, share options granted and restricted share units, deferred share units, and bonus shares awarded.
We determine the fair value of share-based payments awarded using the Black Scholes option pricing model which requires us to make certain estimates, judgements, and assumptions in relation to the expected life of the share options, expected volatility, expected risk‐free rate, and expected forfeiture rate.
Changes to these assumptions could have a material impact on the recorded value of mineral properties acquired during the period and share-based compensation expense recognized in the Company’s financial statements.
ASSESSMENT OF IMPAIRMENT INDICATORS
We apply judgement in assessing whether indicators of impairment exist for our exploration and evaluation (“E&E”) properties and for our mineral properties which could result in a test for impairment.
For our E&E properties, we consider internal and external factors, such as our rights to explore, planned expenditures on E&E activities, the changes in mineral resources and mineral reserves, the potential for viable operations, significant decline in the market value of the Company, changes in metal prices and costs and changes in interest rates to determine whether there are any indicators of impairment or reversal of a previous impairment.
For our mineral properties, we consider external factors such as changes in technology, the market, the economy, or the legal environment, interest rates, and the market capitalization of the Company compared to the book value of the asset. We also consider internal factors such as economic performance of the asset, idle properties and plans to discontinue operations, useful life of the property, our ability to repatriate or use profits from the property, restrictions on access, environmental restrictions, and political instability.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
We consider other factors such as typical practice in foreign jurisdictions related permit renewals, our continued ability to operate as usual while awaiting renewals, our continued performance under regulatory requirements, and the ongoing acceptance by authorities of our annual fees.
INCOME TAXES AND VALUE ADDED TAXES
Our operations involve dealing with uncertainties and judgements in the application of complex tax regulations in multiple jurisdictions.
We recognize potential tax liabilities for uncertain tax positions and matters identified based on our judgement of whether, and the extent to which, additional taxes will be due. We adjust these liabilities after considering changing facts and circumstances. However, due to the complexity of some of these uncertainties, the ultimate outcome may result in a payment that is materially different from our estimate of the tax liabilities.
VAT receivables are generated on the purchase of supplies and services by our companies. The timing and collection of VAT receivables is uncertain as VAT refund procedures in certain jurisdictions require a significant amount of documentation and follow-up. We are exposed to liquidity risk, credit risk and currency risk with respect to our VAT recoverable balances if tax authorities are unwilling to make payments in a timely manner pursuant to our refund filings.
**XVI.**FINANCIAL INSTRUMENTS
In the normal course of business, the Company is inherently exposed to certain financial risks, including market risk, credit risk, and liquidity risk, through its use of financial instruments. The timeframe and the way we manage these risks varies based upon our assessment of these risks and available alternatives for mitigation.
We do not acquire or issue derivative financial instruments for trading or speculative purposes. All transactions undertaken are to support our operations.
**XVII.**OUTSTANDING SHARE DATA
As of the date of this MD&A, the Company had the following equity securities outstanding:
| ● | 315,073,995 common shares |
|---|---|
| ● | 28,253,200 warrants |
| --- | --- |
| ● | 5,407,703 stock options |
| --- | --- |
| ● | 500,000 bonus shares |
| --- | --- |
| ● | 580,219 restricted share units |
| --- | --- |
| ● | 701,927 deferred share units |
| --- | --- |
Further details about these potentially issuable securities are provided in the notes to the accompanying audited consolidated financial statements for the year ended December 31, 2023.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XVIII.**CAUTIONARY NOTES
CAUTIONARY NOTE TO UNITED STATES INVESTORS REGARDING PRESENTATION OF MINERAL RESERVE AND MINERAL RESOURCE ESTIMATES
This MD&A has been prepared in accordance with Canadian standards for the reporting of mineral resource and mineral reserve estimates, which differ from the previous and current standards of the United States securities laws. In particular, and without limiting the generality of the foregoing, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “inferred mineral resources”, “Indicated mineral resources”, “measured mineral resources”, and “mineral resources” used or referenced in this MD&A are Canadian mineral disclosure terms as defined in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards on mineral reserves and mineral resources adopted by the CIM Council on May 10, 2014 (the “CIM Standards”).
For United States reporting purposes, the United States Securities and Exchange Commission (the “SEC”) has adopted amendments to its disclosure rules (the “SEC Modernization Rules”) to modernize the mining property disclosure requirements for issuers whose securities are registered with the SEC under the Securities Exchange Act of 1934, as amended. The SEC Modernization Rules more closely align the SEC’s disclosure requirements and policies for mining properties with current industry and global regulatory practices and standards, including NI 43-101, and replace the historical property disclosure requirements for mining registrants that were included in Industry Guide 7 under the Securities Act of 1933, as amended (the “Securities Act”). As a foreign private issuer that is eligible to file reports with the SEC pursuant to the multijurisdictional disclosure system, the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and provides disclosure under NI 43-101 and the CIM Standards. Accordingly, mineral reserve and mineral resource information contained in this MD&A may not be comparable to similar information disclosed by United States companies.
As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources.” In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be “substantially similar” to the corresponding CIM Standards that are required under NI 43-101. While the above terms are “substantially similar” to CIM Standards, there are differences in the definitions under the SEC Modernization Rules and the CIM Standards. There is no assurance any mineral reserves or mineral resources that the Company may report as “proven mineral reserves”, “probable mineral reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 would be the same had the Company prepared the reserve or resource estimates under the standards adopted under the SEC Modernization Rules or under the prior standards of Industry Guide 7. Accordingly, information contained in this MD&A may not be comparable to similar information made public by U.S. companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This MD&A contains “forward-looking statements” or “forward-looking information” within the meaning of applicable securities legislation (collectively referred to herein as “forward-looking information” or “forward-looking statements”). Forward-looking statements are included to provide information about management’s current expectations and plans that allows investors and others to get a better understanding of the Company’s operating environment, the business operations and financial performance and condition. Forward-looking information is provided as of the date of such documents only and the Company does not intend, and does not assume any obligation, to update this forward-looking information, except as required by law.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
Forward-looking statements include, but are not limited to, statements regarding: planned exploration, development and mining activities and expenditures, including estimated rates of production, timing, AISC, cash costs, sustaining and operating costs, mine production plans, projected mining and process recovery rates, and proposed exploration plans and expected results and timing thereof; statements based on exploration and metallurgical results; timelines for receipt of any required agreements, approvals, or permits, including the approvals for amendments to the MIA at Camino Rojo and the BLM’s filing of the Notice of Intent at South Railroad; the timing of mineral resource updates; terms of and ability to reach a subsequent agreement with Fresnillo to access the sulphide mineral resource at the Camino Rojo Project and obtaining regulatory approvals related thereto; the Transaction with Contact, including the receipt of necessary court, securityholder, and regulatory approvals, and the timing thereof; the Company’s strategy in Panama and potential arbitration filings under the FTA; the Company’s ability to remediate material weaknesses in its internal controls over financial reporting; and the Company’s objectives and strategies. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved (or the negative of any of these terms and similar expressions)) are not statements of fact and may be forward-looking statements.
Forward-looking statements are necessarily based upon a number of factors and assumptions that, if untrue, could cause actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such statements. Forward-looking statements are based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material factors or assumptions used to develop forward-looking statements include, without limitation, the future price of gold and silver; anticipated costs and the Company’s ability to fund its programs; the Company’s ability to carry on exploration, development, and mining activities; tonnage of ore to be mined and processed; ore grades and recoveries; decommissioning and reclamation estimates; currency exchange rates remaining as estimated; prices for energy inputs, labour, materials, supplies and services remaining as estimated; the Company’s ability to secure and to meet obligations under property agreements, including the Layback Agreement; that all conditions of the Company’s Credit Facility will be met; the timing and results of drilling programs; completion of the Transaction with Contact Gold, including receipt of required securityholder, regulatory, and court approvals; mineral reserve and mineral resource estimates and the assumptions on which they are based; the discovery of mineral resources and mineral reserves on the Company’s mineral properties; the obtaining of a subsequent agreement with Fresnillo to access the sulphide mineral resource at the Camino Rojo Project and develop the entire Camino Rojo Project mineral resources estimate; that political and legal developments will be consistent with current expectations; the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction, and operation of projects; the timing of cash flows; the costs of operating and exploration expenditures; the Company’s ability to operate in a safe, efficient, and effective manner; the Company’s ability to obtain financing as and when required and on reasonable terms; the impact of coronavirus (“COVID-19”) on the Company’s operations; that the Company’s activities will be in accordance with the Company’s public statements and stated goals; and that there will be no material adverse change or disruptions affecting the Company or its properties. Page 37
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others: uncertainty and variations in the estimation of mineral resources and mineral reserves; the Company’s dependence on the Camino Rojo Oxide Mine; risks related to the Company’s indebtedness; risks related to exploration, development, and operation activities; foreign country and political risks, including risks relating to foreign operations; risks related to the Cerro Quema Project; delays in obtaining or failure to obtain governmental permits, or non-compliance with permits; environmental and other regulatory requirements; delays in or failures to enter into a subsequent agreement with Fresnillo with respect to accessing certain additional portions of the mineral resource at the Camino Rojo Project and to obtain the necessary regulatory approvals related thereto; the mineral resource estimations for the Camino Rojo Project being only estimates and relying on certain assumptions; loss of, delays in, or failure to get access from surface rights owners; uncertainties related to title to mineral properties; water rights; risks related to natural disasters, terrorist acts, health crises, and other disruptions and dislocations, including the COVID-19 pandemic; financing risks and access to additional capital; risks related to guidance estimates and uncertainties inherent in the preparation of feasibility studies; uncertainty in estimates of production, capital, and operating costs and potential production and cost overruns; the fluctuating price of gold and silver; unknown labilities in connection with acquisitions; global financial conditions; uninsured risks; climate change risks; competition from other companies and individuals; conflicts of interest; risks related to compliance with anti-corruption laws; volatility in the market price of the Company’s securities; assessments by taxation authorities in multiple jurisdictions; foreign currency fluctuations; the Company’s limited operating history; litigation risks; the Company’s ability to identify, complete, and successfully integrate acquisitions; intervention by non-governmental organizations; outside contractor risks; risks related to historical data; the Company not having paid a dividend; risks related to the Company’s foreign subsidiaries; risks related to the Company’s accounting policies and internal controls; the Company’s ability to satisfy the requirements of the Sarbanes–Oxley Act of 2002; enforcement of civil liabilities; the Company’s status as a passive foreign investment company for U.S. federal income tax purposes; information and cyber security; the Company’s significant shareholders; gold industry concentration; shareholder activism; risks related to the failure to obtain securityholder, regulatory or court approvals in connection with the Transaction; and other risks associated with executing the Company’s objectives and strategies.
This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Although the Company believes its expectations are based upon reasonable assumptions and have attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. See the section entitled “Risk Factors” below, and in the section entitled “Risk Factors” in the Annual Information Form, for additional risk factors that could cause results to differ materially from forward-looking statements.
Investors are cautioned not to put undue reliance on forward-looking statements. The forward-looking statements contained herein are made as of the date of this MD&A only and, accordingly, are subject to change after such date. The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions or factors, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. Investors are urged to read the Company’s filings with Canadian securities regulatory agencies, which can be viewed online under the Company’s profile on SEDAR+ at www.sedarplus.ca and the Company’s documents filed with, or furnished to, the SEC, which are available through EDGAR at www.sec.gov.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
**XIX.**RISKS AND UNCERTAINTIES
For more extensive discussion on risks and uncertainties, refer to the Annual Information Form for additional information regarding these risks and other risks and uncertainties in respect of the Company’s business and share price.
The risks described below are not the only risks and uncertainties that the Company faces. Although the Company has done its best to identify the risks to its business, there is no assurance that it has captured every material or potentially material risk and the risks identified below may become more material to the Company in the future or could diminish in importance. Additional existing risks and uncertainties not presently identified by the Company, risks that the Company currently does not consider to be material, and risks arising in the future could cause actual events to differ materially from those described in the Company’s forward-looking information, which could materially affect the Company’s business, results of operations, financial condition, and Company’s share price.
ESTIMATES OF MINERAL RESOURCES AND MINERAL RESERVES AND PRODUCTION RISKS
The figures for mineral reserves and mineral resources contained in the Company’s public disclosure record are estimates only and no assurance can be given that the anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realized, or that mineral reserves or mineral resources will be mined or processed profitably. The Company cannot give any assurance that such estimates will be achieved. Failure to achieve such estimates could have an adverse impact on the Company’s future cash flows, profitability, results of operations, and financial condition.
Until a deposit is actually mined and processed, the quantity of metal and grades must be considered as estimates only. Actual mineral reserves or mineral resources may not conform to geological, metallurgical, or other expectations, and the volume and grade of ore recovered may differ from estimated levels. There are numerous uncertainties inherent in estimating mineral reserves and mineral resources, including many factors beyond the Company’s control. Such estimation is a subjective process, and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and quality of available data and of the assumptions made and judgments used in engineering and geological interpretation. It is inherently impossible to have full knowledge of particular geological structures, faults, voids, intrusions, natural variations in and within rock types and other occurrences. Failure to identify such occurrences in the Company’s assessment of mineral reserves and mineral resources may have a material adverse effect on the Company’s future cash flows, results of operations, and financial condition.
DEPENDENCE ON THE CAMINO ROJO OXIDE MINE
The Camino Rojo Oxide Mine accounts for all of the Company’s current production and is expected to continue to account for all of its production in the near term. Any adverse condition affecting mining, processing conditions, expansion plans, or ongoing permitting at the Camino Rojo Oxide Mine could have a material adverse effect on the Company’s financial performance and results of operations. Even though the Company has established mining operations and estimates of future production, various factors, including costs, actual mineralization, consistency and reliability of ore grades, processing rates, and commodity prices can affect cash flow and profitability, and there can be no assurance that current or future estimates of these factors will reflect actual results and performance. The cost and availability of suitable machinery, supplies, mining equipment, and skilled labour, the existence of competent operational management and prudent financial administration, as well as the availability and reliability of appropriately skilled and experienced consultants, can also affect successful project operations. The activities of the Company at the Camino Rojo Oxide Mine may also be subject to prolonged disruption from a variety of risks normally encountered in production of precious metals as further described under “Mining Industry” below. The failure of the Company to achieve its production estimates could have a material and adverse effect on future cash flows, profitability, results of operations, and financial condition.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
INDEBTEDNESS
As of the date of this MD&A, Orla had indebtedness under its Credit Facility as discussed above in section IX – LIQUIDITY. As a result, the Company is required to use a portion of its cash flow to service principal and interest on its debt, which will limit the cash flow available for other business opportunities. The Company’s ability to make scheduled payments of the principal of, to pay interest on, or to refinance indebtedness depends on its future performance, which is subject to economic, financial, competitive, and other factors beyond its control. The Company may not generate cash flow from operations in the future sufficient to service debt and make necessary capital expenditures. If the Company is unable to generate such cash flow, it may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. The Company’s ability to refinance its indebtedness will depend on the capital markets and its financial condition at such time. The Company may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default. The terms of the Credit Facility also require the Company to satisfy various affirmative and negative covenants and financial ratios. These covenants and ratios limit, among other things, the Company’s ability to incur further indebtedness, create certain liens on assets, engage in certain types of transactions, or pay dividends. The Company can provide no assurances that in the future, it will not be limited in its ability to respond to changes in its business or competitive activities or be restricted in its ability to engage in mergers, acquisitions, or dispositions or acquisitions of assets. Furthermore, a failure to comply with these covenants and ratios would likely result in an event of default under the Credit Facility and would allow the lenders to accelerate the debt, which could materially and adversely affect the Company’s business, financial condition, and results of operations, as well as the market price of the Company’s securities.
EXPLORATION, DEVELOPMENT, AND PRODUCTION RISKS
The business of exploring for minerals, development, and mining involves a high degree of risk. The operations of the Company may be disrupted by a variety of risks and hazards normally encountered in the exploration, development, and production of precious metals, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, cave-ins, flooding, and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, personal injury or loss of life, and damage to tailings dams, property, and environmental damage, all of which may result in possible legal liability. The occurrence of any of these events could result in a prolonged interruption of the Company’s activities that would have a material adverse effect on its business, financial condition, results of operations, and prospects. Further, the Company may be subject to liability or sustain losses in relation to certain risks and hazards against which it cannot insure or for which it may elect not to insure. The occurrence of operational risks and/or a shortfall or lack of insurance coverage could have a material adverse impact on the Company’s results of operations and financial condition.
The exploration for and development of mineral deposits involves significant risks, which even a combination of careful evaluation, experience, and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties that are explored are ultimately developed into producing mines. Even when mineralization is discovered, it may take several years until production is possible, during which time the economic feasibility of production may change. Major expenses may be required to locate and establish mineral reserves, to develop metallurgical processes, and to construct mining and processing facilities at a particular site. It is impossible to ensure that the exploration or development programs planned by the Company will result in a profitable commercial mining operation. Whether a mineral deposit will be commercially viable depends on a number of factors, some of which are: the particular attributes of the deposit, such as size, grade and proximity to infrastructure, metal prices that are highly cyclical, and government regulations, including regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of minerals, and environmental protection. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in the Company not receiving an adequate return on invested capital. There is no certainty that the expenditures made towards the search and evaluation of mineral deposits will result in discoveries or development of commercial quantities of ore. Development projects have no operating history upon which to base estimates of future capital and operating costs. For development projects, mineral resource estimates and estimates of operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques, and feasibility and pre-feasibility studies, which derive estimates of capital and operating costs based upon anticipated tonnage and grades of ore to be mined and processed, ground conditions, the configuration of the ore body, expected recovery rates of minerals from ore, estimated operating costs, and other factors. As a result, actual production, cash operating costs, and economic returns could differ significantly from those estimated. It is not unusual for new mining operations to experience problems during the start-up phase, and delays in the commencement of production can often occur.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
FOREIGN COUNTRY AND POLITICAL RISK
The Company’s principal mineral properties are located in Mexico, Panama, and the United States. The Company is subject to certain risks as a result of conducting foreign operations, including, but not limited to: currency fluctuations; possible political or economic instability that may result in the impairment or loss of mineral titles or other mineral rights; opposition from environmental or other non-governmental organizations; government regulations relating to the mining industry; renegotiation, cancellation, or forced modification of existing contracts; expropriation or nationalization of property; changes in laws or policies or increasing legal and regulatory requirements including those relating to taxation, royalties, imports, exports, duties, currency, or other claims by government entities, including retroactive claims and/or changes in the administration of laws, policies, and practices; uncertain political and economic environments; war, terrorism, narco-terrorist actions or activities, sabotage, and civil disturbances; delays in obtaining or the inability to obtain or maintain necessary governmental or similar permits or to operate in accordance with such permits or regulatory requirements; currency fluctuations; import and export regulations, including restrictions on the export of gold or other minerals; limitations on the repatriation of earnings; and increased financing costs. Any changes in regulations or shifts in political attitudes are beyond the control of the Company and may adversely affect its business.
The introduction of new tax laws, regulations, or rules, or changes to, or differing interpretation of, or application of, existing tax laws, regulations, or rules in any of the countries in which the Company currently conducts business or in the future may conduct business, could result in an increase in taxes, or other governmental charges, duties, or impositions. No assurance can be given that new tax laws, rules, or regulations will not be enacted or that existing tax laws will not be changed, interpreted, or applied in a manner that could result in the Company being subject to additional taxation or that could otherwise have a material adverse effect on the Company.
Although the Company believes that its exploration and production activities are currently carried out in accordance with all applicable rules and regulations, new rules and regulations may be enacted, and existing rules and regulations may be applied in a manner that could limit or curtail production or development of the Company’s properties. Amendments to current laws and regulations governing the operations and activities of the Company or more stringent implementation thereof could have a material adverse effect on the Company’s business, financial condition, and results of operations.
The Company does not carry political risk insurance.
The Company’s primary operations are currently conducted in Mexico. Violence in Mexico is well documented and has, over time, been increasing. Conflicts between the drug cartels and violent confrontations with authorities are not uncommon. Other criminal activity, such as kidnapping and extortion, is also an ongoing concern. Many incidents of crime and violence go unreported and efforts by police and other authorities to reduce criminal activity are challenged by a lack of resources, corruption, and the pervasiveness of organized crime. Incidents of criminal activity have occasionally affected the communities in the vicinity of the Company’s operations. Such incidents may prevent access to the Company’s mines or offices; halt or delay operations and production; result in harm to employees, contractors, visitors, or community members; increase employee absenteeism; create or increase tension in nearby communities; or otherwise adversely affect the Company’s ability to conduct business. The Company can provide no assurance that security incidents, in the future, will not have a material adverse effect on its operations.
Additionally, on May 8, 2023, the Mexican government completed a decree reforming various provisions of the mining law (the “Decree”), which was published in the Official Gazette and became law on May 9, 2023. The Decree makes significant changes to the current mining laws, including but not limited to: reducing new mining license concession terms; restricting the granting of mining concessions requiring public auctions; imposing conditions on water use and availability; imposing regulations on mining concession transfers; imposing additional grounds for cancellation of mining concessions and further limitations on mining in protected areas; granting preferential rights to mining strategic minerals to state owned enterprises; imposing additional requirements for financial instruments to be provided to guarantee preventive, mitigation, and compensation measures resulting from the social impact assessment, as well as potential damages that may occur during mining activities. The full impact of the Decree on the Company is currently unknown, as the Mexican Government has yet to publish the associated regulations.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
On June 16, 2023, the Company filed an “Amparo” in the Second District Court of the State of Zacatecas against the Decree on various grounds. An Amparo is a judicial action to protect a party’s rights from acts or omissions of governmental authorities that violate the rights and guarantees of such party that are protected by the Mexican Constitution. On August 25, 2023, the District Court judge declined to grant the Company’s motion to suspend application of the Decree while the Company awaits a final judgment on its Amparo, which decision the Company has appealed. The hearing for the Amparo was held in December 2023. In February 2024, District Court dismissed the Company’s Amparo, which the Company intends to appeal to the Collegiate Circuit Court of Mexico. If our challenge to the Decree is not successful, the changes to the mining law may have material impacts on our current and future exploration activities and operations in Mexico, the extent of which is yet to be determined.
THE CERRO QUEMA PROJECT
The Company holds an interest in the Cerro Quema Project, located in Panama. On October 27, 2023, Panama’s President, Laurentino Cortizo Cohen, signed Decree 23-2023. Decree 23-2023 (i) banned the granting of new concessions for the exploration, extraction, transportation and exploitation of metal mining in Panama, (ii) rejected all pending requests for the granting of new concessions for the exploration, extraction, transport and exploitation of metal mining and (iii) ordered MICI to dispose of the files within three months of the passing of Decree 23-2023. On November 3, 2023, the National Assembly of Panama passed Law 407, which instituted a moratorium on granting, renewing, or extending concessions for the exploration, extraction, transportation or exploitation of metal mining in Panama. On December 15, 2023, MCQSA, the Company’s subsidiary that holds the Cerro Quema Project, received three resolutions from MICI, the Panamanian Ministry of Commerce and Industry. The resolutions rejected the Company’s request for extension for the concessions comprising the Cerro Quema Project, retroactively declared the concessions canceled, and declared the area comprising the concessions to be a reserve area under the Panamanian mining code. Under the Panamanian mining code, MICI is prohibited from granting mining concessions for exploration or extraction on a reserve area.
As a result of these developments and certain other factors, the Company incurred an impairment charge of $72.4 million in respect of the Cerro Quema Project for the financial year ended December 31, 2023.
The Company is exploring all legal remedies available to protect its historical investments and potentially unlock additional value for its stakeholders, including pursuing its rights under the FTA. In accordance with the provisions of the FTA, the Company expects that it will submit a Notice of Intent to Arbitrate to the Government of Panama. The Notice of Intent facilitates consultations between the Government of Panama and the Company. In the event that such consultations are unsuccessful, the Company expects to proceed to file a Request for Arbitration. This arbitration process may not be effective or successful. Even if successful, there is no certainty as to the quantum or timing of any award on damages and/or compensatory interest, recovery of all, or any, legal costs, or the Company’s ability to enforce any award against Panama. If consultations and the arbitration process are unsuccessful, the Company will lose its ability to monetize or put the Cerro Quema Project into production, resulting in the Company removing the project from its total mineral reserve and mineral resource estimates. The mineral reserve and mineral resource estimates for the Cerro Quema Project set forth in the Company’s public disclosure assume that there is a reasonable prospect that the Company will be granted extensions to the concessions comprising the project, which would be dependent on reaching an agreement with the Panamanian government.
General elections in Panama are scheduled for May 5, 2024.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
PERMITS AND LICENSES
The Company’s operations in each of the jurisdictions in which it operates are subject to receiving and maintaining permits (including environmental permits) from appropriate governmental authorities. Furthermore, prior to any development on any of its properties, the Company must receive permits from appropriate governmental authorities. The Company can provide no assurance that necessary permits will be obtained, that previously issued permits will not be suspended for a variety of reasons, including through government or court action, or that delays will not occur in connection with obtaining all necessary permits, renewals of permits for existing operations, or additional permits for any possible future changes to operations, or additional permits associated with new legislation. In addition, the timing of permits is uncertain and processing times may be negatively affected by unforeseen circumstances, such as COVID-19. The Company can provide no assurance that it will continue to hold or obtain, if required to, all permits necessary to develop or continue operating at any particular site, which would materially adversely affect its operations.
GOVERNMENT REGULATION
The exploration, development, and mining activities of the Company are subject to various federal, provincial/state, and local laws governing prospecting, development, taxes, labour standards, toxic substances, and other matters. Exploration, development, and mining activities are also subject to various federal, provincial/state, and local laws and regulations relating to the protection of the environment. These laws mandate, among other things, the maintenance of air and water quality standards, and land reclamation. These laws also set forth limitations on the generation, transportation, storage, and disposal of solid and hazardous waste. Although the Company’s exploration, development, and mining activities are currently carried out in accordance with all applicable rules and regulations governing operations and exploration activities, no assurance can be given that new rules and regulations, amendments to current laws and regulations or more stringent implementation thereof could have a substantial adverse impact on the Company’s activities.
For example, an ecological tax implemented by the state Congress of Zacatecas in 2017 could have a significant impact on the economics of the Camino Rojo Project. This tax is applied to cubic metres of material extracted during mining, square metres of material impacted by dangerous substances, tonnes of carbon dioxide produced during mining processes, and tonnes of waste stored in landfills. Due to the uncertainty of application of this tax and turbulence between active mining companies and the State of Zacatecas, the long-term effects and implementation of this ecological tax are currently unknown and were not considered in the 2021 Camino Rojo Report. The Company has received assessments in respect of this tax; however, the Company’s view is that the sections of the law pursuant to which these assessments have been issued do not apply to the Company at this time and, accordingly, the Company has filed the appropriate appeals. We expect this matter will be resolved by judicial process. Due to this uncertainty, no amounts have been accrued in the Company’s financial statements in respect of this ecological tax. The amounts eventually paid in respect of this tax could be material.
ENVIRONMENTAL RISKS AND HAZARDS
All phases of the Company’s mineral exploration, development, and mining operations are subject to environmental regulation in the various jurisdictions in which it operates. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors, and employees. There is no assurance that future changes in environmental regulations, laws, and permits, if any, will not adversely affect the Company’s operations. Environmental hazards may exist on the properties on which the Company holds interests which are unknown to the Company at present, which have been caused by previous or existing owners or operators of the properties. The Company may become liable for such environmental hazards caused by previous owners and operators of the properties even where it has attempted to contractually limit its liability.
Government approvals and permits are currently, and may in the future be, required in connection with the Company’s operations. To the extent such approvals are required and not obtained; the Company may be curtailed or prohibited from proceeding with planned exploration, development, or mining of mineral properties.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.
THE CAMINO ROJO MINERAL RESOURCE ESTIMATE ASSUMES THAT THE COMPANY CAN ACCESS MINERAL TITLES AND LANDS THAT ARE NOT CONTROLLED BY THE COMPANY
All of the mineralization comprised in the Company’s mineral resource estimate with respect to the Camino Rojo Project is contained on mineral titles controlled by Orla. However, the mineral resource estimate assumes that the north wall of the conceptual floating pit cone used to demonstrate reasonable prospects for eventual economic extraction extends onto lands where mineral title is held by Fresnillo and that waste would be mined on Fresnillo’s mineral titles. On December 21, 2020, Orla announced that it had completed the Layback Agreement. The Layback Agreement allows Orla to expand the Camino Rojo Oxide Mine pit onto part of Fresnillo’s mineral concession located immediately north of Orla’s property. This expansion will increase oxide ore available for extraction on Orla’s property below the pit outlined in Orla’s previous, 2019 technical report on the project.
However, the Layback Agreement is only with respect to the portion of the heap leach material included in the current mineral reserve. As such, any potential development of the Camino Rojo Project that includes an open pit encompassing the entire mineral resource estimate would be dependent on an additional agreement with Fresnillo (or any potential subsequent owner of the mineral titles). It is estimated that approximately two-thirds of the mill resource estimate and one-quarter of the leach resource estimate comprising the mineral resource estimate are dependent on this additional agreement being entered into with Fresnillo. The leach mineral resource dependent on the additional agreement is mainly comprised of less oxidized transitional material with the lowest predicted heap-leach recoveries.
Delays in, or failure to obtain, an additional agreement with Fresnillo would affect the development of a significant portion of the mineral resources of the Camino Rojo Project that are not included in the 2021 Camino Rojo Report mine plan, in particular by limiting access to significant mineralized material at depth. There can be no assurance that the Company will be able to negotiate such additional agreement on terms that are satisfactory to the Company and Fresnillo or that there will not be delays in obtaining the necessary additional agreement. Should such a subsequent agreement with Fresnillo not be obtained on favourable terms, the economics of any potential mine development using the full mineral resource estimate would be significantly negatively impacted.
MINERAL RESOURCE ESTIMATIONS FOR CAMINO ROJO ARE ONLY ESTIMATES AND RELY ON CERTAIN ASSUMPTIONS
The estimation of mineral resources relies on the judgment of the independent Qualified Person preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results, and industry practices. Valid estimates made at a given time may significantly change when new information becomes available.
In particular, the estimation of mineral resources for the Camino Rojo Project has assumed that there is a reasonable prospect for reaching an additional agreement with Fresnillo with respect to the mill resource included in the mineral resource estimate. While the Company believes that the mineral resource estimates for the Camino Rojo Project are well established and reflect best estimates, by their nature resource estimates are imprecise and depend on inferences that may ultimately prove to be inaccurate, including the assumption that an additional agreement with Fresnillo will be reached.
Although all mineralization included in the Company’s mineral resource estimate for the Camino Rojo Project are located on mineral concessions controlled by the Company, failure to reach an additional agreement with Fresnillo would result in a significant reduction of the mineral resource estimate by limiting access to mineral resources below the current mineral reserves. Any material changes in mineral resource estimates may have a material adverse effect on the Company.
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| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
SURFACE RIGHTS
There are four ejido communities in the vicinity of the main area of drilling at the Camino Rojo Project and other ejido lands cover most of the rest of the property. The lands that are used by the Company for the open pit mine and heap leach facility are subject to an expropriation agreement between the Company and the Ejido San Tiburcio. Currently, the Company has the legal possession of such lands until 2043. For exploration activities, the Company enters into temporary occupation agreements with the ejido communities, which allow the Company to use the surface of the lands for its mining activities for a set period of time. In Mexico, mining rights that are covered under a concession do not include direct ownership or possession rights over the surface, or surface access, and at any particular time the Company may be involved in negotiations with various ejido communities to enter into new temporary occupation agreements or other surface access agreements or amend existing agreements. Failure to reach new agreements or disputes regarding existing agreements may cause, blockades, suspension of operations, delays to projects, and, on occasion, may lead to legal disputes. Any such failure to reach new agreements or disputes regarding existing agreements may have a material adverse effect on the Company’s business.
Access to the Company’s South Railroad Project and certain mineral properties at the project are or will be governed by surface use agreements or other forms of access rights or agreements such as easements and rights-of-way. Failure to meet or otherwise satisfy required contractual obligations and make payments with respect to such agreements and rights or to otherwise obtain such agreements or rights may result in loss of access to the project or to certain mineral properties.
TITLE MATTERS
The acquisition of title to mineral tenures in Mexico and the United States is a detailed and time-consuming process. Although the Company has diligently investigated title to all mineral tenures and, to the best of its knowledge, title to all of its properties is in good standing, this should not be construed as a guarantee of title. The Company can provide no assurances that there are no title defects affecting its properties. Other parties may dispute title to any of the Company’s mineral properties and any of the Company’s properties may be subject to prior unregistered liens, agreements, transfers or claims, and title may be affected by, among other things, undetected encumbrances or defects or governmental actions. Title to the Company’s properties may also be affected by undisclosed and undetected defects. If any claim or challenge is made regarding title, the Company may be subject to monetary claims or be unable to develop properties as permitted or to enforce its rights with respect to its properties.
Certain of the Company’s mineral rights at the South Railroad Project consist of unpatented mining claims. Unpatented mining claims are unique real property interests and are generally considered to be subject to greater risk than other real property interests because the legal validity of unpatented mining claims is often uncertain. Unpatented mining claims provide only possessory title and their legal validity is often subject to contest by third parties or the federal government. These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of mining claim boundaries and location monuments, assessment work, unregistered agreements, undetected defects and possible conflicts with other mining claims. Since a substantial portion of all mineral exploration, development and mining in the western United States now occurs on unpatented mining claims, this uncertainty is inherent in the mining industry.
The South Railroad Project is also subject to annual compliance with assessment work or fee requirements, property taxes, lease payments and other contractual payments and obligations. Any failure to make such payments or comply with such requirements or obligations could result in the loss of all or a portion of the Company’s interest in the South Railroad Project.
In addition, certain of the Company’s subsurface mineral rights to the South Railroad Project are secured or controlled by a contractual interest in private surface and mineral property in the form of various surface use agreements and mining/mineral leases. Subject to the terms of those agreements and leases, certain of those agreements and leases may not have provisions for automatic renewal. If the Company is not able to negotiate for the extension of those agreements and leases they may expire and no longer form part of the Company’s mineral portfolio, which may have a material adverse effect on the Company’s business.
Page 45
Table of Contents
| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
OUR ACTIVITIES MAY BE ADVERSELY AFFECTED BY NATURAL DISASTERS, TERRORIST ACTS, HEALTH CRISES AND OTHER DISRUPTIONS AND DISLOCATIONS, INCLUDING BY THE COVID-19 PANDEMIC, WHETHER THOSE EFFECTS ARE LOCAL, NATIONWIDE, OR GLOBAL
Upon the occurrence of a natural disaster, pandemic, or upon an incident of war, riot, or civil unrest, the impacted country, and the overall global economy, may not efficiently and quickly recover from such an event, which could have a material adverse effect on the Company. Terrorist attacks, public health crises including epidemics, pandemics, outbreaks of new infectious diseases or viruses, and related events can result in volatility and disruption to global supply chains, operations, mobility of people, patterns of consumption and service, and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations, and other factors relevant to the Company.
Global markets have been adversely impacted by emerging infectious diseases and/or the threat of outbreaks of viruses, other contagions or epidemic diseases, including the novel COVID-19, and many industries, including the mining industry, have been impacted. The outbreak has led to a widespread crisis that is adversely affecting the economies and financial markets of many countries. If increased levels of volatility continue, or in the event of a rapid destabilization of global economic conditions, there may be an adverse effect on commodity prices, demand for metals, availability of equity or credit, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Company’s securities. In addition, there may not be an adequate response to emerging infectious diseases, or significant restrictions may be imposed by a government, either of which may impact mining operations. There are potentially significant economic and social impacts, including labour shortages and shutdowns, delays and disruption in supply chains, social unrest, government or regulatory actions or inactions, including quarantines, travel restrictions, declaration of national emergencies, permanent changes in taxation or policies, decreased demand or the inability to sell and deliver doré or concentrates and resulting commodities, declines in the price of commodities, delays in permitting or approvals, suspensions or mandated shut downs of operations, governmental disruptions, or other unknown events with potentially significant impacts. At this time, the Company cannot accurately predict what impacts there will be or what effects these conditions will have on the business, including those uncertainties relating to the ultimate geographic spread, the duration of the outbreak, and the length of restrictions or responses that have been or may be imposed by the governments. Given the global nature of the Company’s operations, the Company may not be able to accurately predict which operations will be impacted. Any outbreak or threat of an outbreak of a contagious or epidemic disease could have a material adverse effect on the Company, its business and operational results, and the market price of its securities.
COMMODITY PRICES
The profitability of mining operations is significantly affected by changes in the market price of gold and other minerals. The level of interest rates, the rate of inflation, world supply of these minerals and stability of exchange rates can all cause significant fluctuations in metal prices. Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments. The price of gold and other minerals has fluctuated widely in recent years, and future serious price declines could cause commercial production to be impracticable.
UNKNOWN LIABILITIES IN CONNECTION WITH ACQUISITIONS
The Company has assumed certain liabilities and risks as part of its acquisitions. While the Company conducted thorough due diligence in connection with such acquisitions, there may be liabilities or risks that the Company failed, or was unable, to discover in the course of performing the due diligence investigations or for which the Company was not indemnified. Any such liabilities, individually or in the aggregate, could have a material adverse effect on the Company’s financial position and results of operations.
UNINSURED RISKS
The Company carries insurance to protect against certain risks in such amounts as it considers adequate. Risks not insured against include environmental pollution or other hazards against which such corporations cannot insure or against which they may elect not to insure.
Page 46
Table of Contents
| ORLA MINING LTD. | |
|---|---|
| Management’s Discussion and Analysis | |
| Three and twelve months ended December 31, 2023 | United States dollars unless otherwise stated |
ACQUISITIONS AND INTEGRATION
From time to time, the Company examines opportunities to acquire additional mining assets and businesses. Any acquisition that the Company may choose to complete may be of a significant size, may change the scale of the Company’s business and operations, and may expose the Company to new geographic, political, operating, financial, and geological risks. The Company’s success in its acquisition activities depends on its ability to identify suitable acquisition candidates, negotiate acceptable terms for any such acquisition, and integrate the acquired operations successfully with those of the Company.
LITIGATION RISK
All industries, including the mining industry, are subject to legal claims, with and without merit. Defence and settlement costs of legal claims can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation and dispute resolution process, the litigation process could take away from management time and efforts and the resolution of any particular legal proceeding to which the Company may become subject could have a material adverse effect on the Company’s financial position, results of operations, or the Company’s property development or operations.
CONFLICTS OF INTEREST
Certain directors of the Company also serve as directors and/or officers of other companies involved in natural resource exploration and development. Consequently, there exists the possibility for such directors to be in a position of conflict. Any decision made by such directors involving the Company will be made in accordance with their duties and obligations to deal fairly and in good faith with the Company and such other companies. In addition, such directors will declare, and refrain from voting on, any matter in which such directors may have a conflict of interest.
COMPLIANCE WITH ANTI-CORRUPTION LAWS
The Company is subject to various anti-corruption laws and regulations including, but not limited to, the Canadian Corruption of Foreign Public Officials Act, the US Foreign Corrupt Practices Act, and similar laws in any country in which the Company conducts business. In general, these laws prohibit a company and its employees and intermediaries from bribing or making other prohibited payments to foreign officials or other persons to obtain or retain business or gain some other business advantage. In recent years, there has been a general increase in both the frequency of enforcement and the severity of penalties under such laws, resulting in greater scrutiny and punishment to companies convicted of violating anti-corruption and anti-bribery laws. Furthermore, a company may be found liable for violations by not only its employees, but also by its contractors and third-party agents.
The Company’s Camino Rojo Project is located in Mexico and the Cerro Quema Project is located in Panama, both of which countries which are perceived as having fairly high levels of corruption. Orla cannot predict the nature, scope, or effect of future anti-corruption regulatory requirements to which the Company’s operations might be subject or the manner in which existing laws might be administered or interpreted.
Failure to comply with the applicable legislation and other similar foreign laws could expose the Company and/or its senior management to civil and/or criminal penalties, other sanctions and remedial measures, legal expenses, and reputational damage, all of which could materially and adversely affect the Company’s business, financial condition, and results of operations. Likewise, any investigation of any potential violations of the applicable anti-corruption legislation by Canadian, American, or foreign authorities could also have an adverse impact on the Company’s business, financial condition, and results of operations.
As a consequence of these legal and regulatory requirements, the Company has instituted policies with regard to anti-corruption and anti-bribery, as well as business ethics, which have been designed to ensure that Orla and its employees comply with applicable anti-corruption laws and regulations. However, there can be no assurance or guarantee that such efforts have been and will be completely effective in ensuring the Company’s compliance, and the compliance of its employees, consultants, contractors, and other agents, with all applicable anti-corruption laws and regulations. Page 47
Exhibit 99.3
Consolidated Financial Statements
Year ended December 31, 2023 and 2022
Presented in United States dollars
Report of independent registered public accounting firm
To the Shareholders and the Board of Directors of
Orla Mining Ltd.
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheets of Orla Mining Ltd. [the “Company”] as of December 31, 2023 and 2022, the related consolidated statements of income (loss) and comprehensive income (loss), cash flows and changes in equity for each of the two years in the period ended December 31, 2023, and the related notes [collectively referred to as the “consolidated financial statements”]. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and its consolidated financial performance and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with International Financial Reporting Standards [“IFRSs”] as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) [“PCAOB”], the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 19, 2024 expressed an adverse opinion thereon.
Basis for opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: [1] relates to accounts or disclosures that are material to the financial statements and [2] involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures^^to which it relates.
Evaluation of Cerro Quema Project Cash Generating Unit Impairment (Cerro Quema CGU)
| Description of the Matter | At December 31, 2023, the carrying value of Exploration and Evaluation Properties related to the Company’s Cerro Quema Project was $10 million, which is disclosed in Note 11 to the consolidated financial statements. This asset comprises substantially all of the carrying value of the Cerro Quema CGU. As further described in Note 27(f), the Company reviews and evaluates its exploration and evaluation properties for impairment when indicators and circumstances indicate that the related carrying amounts may not be recoverable at the CGU level. When the Company determines the existence of indicators of impairment, management performs an assessment to determine whether impairment has occurred. An impairment exists when the carrying value of a CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal (FVLCD) and its value in use. During the year ended December 31, 2023, the Company determined that indicators of impairment suggested that the Cerro Quema CGU’s carrying amount exceeded its recoverable amount, and estimated its recoverable amount based on its FVLCD, which resulted in an impairment in exploration and evaluation properties of the Cerro Quema CGU of $72.4 million. Related disclosures are included in Note 11(a). This matter was identified as a critical audit matter due to the significant judgment applied by management in determining the recoverable amount, primarily resulting from evaluating the impacts of the local prohibition of exploration, extraction and exploitation of metal mining on estimating the future cash flows, and in selecting the key assumptions used in estimating the FVLCD of the properties based on recent transactions within the sector and neighboring areas and other market information. Changes in these assumptions could materially impact the recoverable amount of the CGU. | |
|---|---|---|
| How We Addressed the Matter in Our Audit | | Our procedures included, among others, obtaining an understanding of the Company’s impairment review process, inspecting documents relating to the prohibition of the exploration, extraction and exploitation of metal mining in Panama, inspecting the land titles and possession rights agreements and searching Panama’s National Registry of land titles to evaluate the legal ownership of the related properties that the Company holds the land title for. We involved our valuation specialists in evaluating the methods and assumptions used in the Company’s external valuator’s (valuator) valuation, which included evaluating the valuator’s findings and comparing the estimated fair value of the properties to recent comparable transactions in the area, and testing the completeness and accuracy of data used by the valuator. We also assessed the adequacy of the disclosures related to the impairment of the Cerro Quema CGU. |
/s/ Ernst & Young LLP
Chartered Professional Accountants
We have served as the Company’s auditor since 2020.
Vancouver, Canada
March 19, 2024
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Orla Mining Ltd.
Opinion on Internal Control Over Financial Reporting
We have audited Orla Mining Ltd.’s internal control over the financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organization of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, Orla Mining Ltd. (the Company) has not maintained effective internal controls over financial reporting, as of December 31, 2023 based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment. Management has identified a material weakness at the Company’s Mexican operating subsidiary. Management’s review controls were not designed and operating effectively due to insufficient (i) documentation to evidence the performance of multiple key controls, (ii) operation of management review controls at a level of precision necessary to identify all potentially material errors, and (iii) verification of the completeness and accuracy of the data used in the performance of controls. The foregoing also impacted the information used in executing the Company’s corporate oversight controls causing certain of them to operate ineffectively. Management has also identified a separate material weakness in the information technology general controls (“ITGCs”) over an IT system that supports the Company’s financial reporting process. Certain ITGCs were not designed or operating effectively as at December 31, 2023, in the areas of user access and change management. This resulted in inadequate segregation of duties for the related IT application controls. The automated and manual business process controls that are dependent on the affected ITGCs have also been impacted by the foregoing.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2023 and 2022, the related consolidated statements of income (loss), comprehensive income (loss), cash flows and changes in equity for each of the two years in the period ended December 31, 2023, and the related notes, These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report dated March 19, 2024, which expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in under the heading Internal Control Over Financial Reporting contained in the accompanying management’s discussion and analysis. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Vancouver, Canada
March 19, 2024
ORLA MINING LTD. Consolidated Balance Sheets
(thousands of United States dollars)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | December 31, | | December 31, | ||
| | 2023 | **** | 2022 | |||
| | | | | | | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | $ | 96,632 | | $ | 96,278 |
| Trade and other receivables | | | 379 | | | 365 |
| Value added taxes recoverable (note 9) | | | 15,571 | | | 8,659 |
| Inventory (note 8) | | 29,451 | | 22,446 | ||
| Prepaid expenses | | 3,142 | | 2,824 | ||
| Restricted cash | | | — | | | 2,290 |
| | | 145,175 | | 132,862 | ||
| Restricted cash | | 1,011 | | 1,142 | ||
| Value added taxes recoverable (note 9) | | 826 | | 5,229 | ||
| Long term inventory (note 8) | | | 5,627 | | | 4,096 |
| Property, plant and equipment (note 10) | | | 211,719 | | | 224,416 |
| Exploration and evaluation properties (note 11) | | 170,000 | | 242,743 | ||
| Deferred tax assets | | | — | | | 2,405 |
| Other non-current assets | | | 1,420 | | | 923 |
| TOTAL ASSETS | | $ | 535,778 | | $ | 613,816 |
| | | | | | | |
| LIABILITIES | | | | | | |
| Current liabilities | | | | | | |
| Trade payables and accrued liabilities (note 12) | | $ | 20,656 | | $ | 19,675 |
| Current portion of long term debt (note 13) | | | — | | | 45,000 |
| Income taxes payable | | 8,002 | | 33,102 | ||
| | | | 28,658 | | | 97,777 |
| Lease obligations (note 14) | | 1,993 | | 2,327 | ||
| Long term debt (note 13) | | 88,350 | | 100,795 | ||
| Deferred revenue | | | 8,176 | | | 7,500 |
| Site closure provisions (note 15) | | 7,424 | | 8,261 | ||
| Other long term liabilities | | | 443 | | | 172 |
| Deferred tax liabilities | | | 193 | | | — |
| TOTAL LIABILITIES | | 135,237 | | 216,832 | ||
| | | | | | | |
| SHAREHOLDERS’ EQUITY | | | | | | |
| Share capital (note 16) | | 474,361 | | 445,316 | ||
| Reserves | | 24,387 | | 24,009 | ||
| Accumulated other comprehensive loss | | (439) | | (1,583) | ||
| Accumulated deficit | | (97,768) | | (70,758) | ||
| TOTAL SHAREHOLDERS’ EQUITY | | 400,541 | | 396,984 | ||
| | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 535,778 | | $ | 613,816 |
| | | |
|---|---|---|
| /s/ Jason Simpson | /s/ Elizabeth McGregor | |
| Jason Simpson, Director | | Elizabeth McGregor, Director |
The accompanying notes are an integral part of these consolidated financial statements.
Page 6
ORLA MINING LTD. Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(thousands of United States dollars)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | **** | 2023 | **** | 2022 | ||
| | | | | | | |
| REVENUE (note 3) | | $ | 233,643 | | $ | 193,230 |
| | | | | | | |
| COST OF SALES | | | ||||
| Operating costs (note 4(a)) | | (57,672) | | (45,597) | ||
| Depletion and depreciation | | | (28,649) | | | (14,953) |
| Royalties (note 4(b)) | | (5,795) | | (4,819) | ||
| | | (92,116) | | (65,369) | ||
| | | | | | | |
| EARNINGS FROM MINING OPERATIONS | | | 141,527 | | | 127,861 |
| | | | | | | |
| GENERAL AND ADMINISTRATIVE EXPENSES (note 6) | | | (13,408) | | | (10,913) |
| | | | | | | |
| EXPLORATION AND EVALUATION | | | | | | |
| Exploration and evaluation (note 5) | | | (34,616) | | | (18,939) |
| Loss on impairment and derecognition of exploration properties (note 11) | | | (72,743) | | | — |
| | | | (107,359) | | | (18,939) |
| | | | | | | |
| OTHER | | | | |||
| Interest income | | | 5,387 | | | 2,167 |
| Depreciation | | (504) | | (277) | ||
| Share based payments (note 18) | | (3,221) | | (2,447) | ||
| Interest and accretion expense (note 7) | | (11,838) | | (8,890) | ||
| Loss on extinguishment of Credit Facility (note 13(a)) | | | (1,547) | | | (13,219) |
| Foreign exchange and other gains (losses) | | (1,443) | | 3,055 | ||
| | | (13,166) | | (19,611) | ||
| | | | | | | |
| INCOME BEFORE TAXES | | | 7,594 | | | 78,398 |
| Income taxes (note 25) | | | (34,604) | | | (32,628) |
| | | | | | | |
| INCOME (LOSS) FOR THE YEAR | | $ | (27,010) | | $ | 45,770 |
| | | | | | | |
| OTHER COMPREHENSIVE INCOME (LOSS) | | | | |||
| Items that may in future periods be reclassified to profit or loss: | | | | |||
| Foreign currency differences arising on translation | | 1,144 | | (4,024) | ||
| TOTAL COMPREHENSIVE INCOME (LOSS) | | $ | (25,866) | | $ | 41,746 |
| | | | | | | |
| | | | | | | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (note 17) | | | | | ||
| Basic (millions) | | | 311.5 | | | 272.2 |
| Diluted (millions) | | | 311.5 | | | 292.8 |
| | | | | | | |
| EARNINGS (LOSS) PER SHARE (note 17) | | | | | | |
| Basic | | $ | (0.09) | | $ | 0.17 |
| Diluted | | $ | (0.09) | | $ | 0.16 |
The accompanying notes are an integral part of these consolidated financial statements.
Page 7
ORLA MINING LTD.
Consolidated Statements of Cash Flows
(thousands of United States dollars)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | 2023 | 2022 | ||||
| OPERATING ACTIVITIES | | | | | | |
| Income (loss) for the year | | $ | (27,010) | | $ | 45,770 |
| Adjustments for: | | | | | | |
| Interest and accretion expense (note 7) | | 11,838 | | 8,890 | ||
| Income tax expense | | | 34,604 | | | 32,628 |
| Income taxes paid | | | (27,848) | | | (3,150) |
| Income tax instalments paid | | (28,910) | | — | ||
| Payment of cash settled RSUs and DSUs | | | (466) | | (2,049) | |
| Adjustments for items not affecting cash: | | | | | ||
| Depreciation and depletion | | 29,153 | | 15,230 | ||
| Share based payments (note 18) | | | 3,221 | | | 2,447 |
| Unrealized foreign exchange loss (gain) | | | (843) | | | (1,862) |
| Loss on impairment and derecognition of exploration properties (note 11) | | | 72,743 | | | — |
| Loss on extinguishment of Credit Facility | | | 1,547 | | | 13,219 |
| Other | | 866 | | (31) | ||
| Cash provided by operating activities before changes in non-cash working capital | | | 68,895 | | | 111,092 |
| Changes in non-cash working capital (note 20(b)) | | (3,599) | | | (15,781) | |
| Cash provided by operating activities | | | 65,296 | | | 95,311 |
| | | | | | | |
| INVESTING ACTIVITIES | | | | | ||
| Purchase of plant and equipment | | (8,149) | | | (5,726) | |
| Expenditures on mineral properties | | | (12,705) | | | (12,252) |
| Deposits and other payments on long term assets | | (496) | | | (855) | |
| Restricted cash and environmental bonding | | 2,422 | | | 3,176 | |
| Value added taxes received | | | — | | | 18,527 |
| Payment pursuant to the Layback Agreement (note 13(c)) | | | (22,800) | | | (15,000) |
| Acquisition of Gold Standard, net of cash received | | — | | | (1,226) | |
| Cash used in investing activities | | | (41,728) | | | (13,356) |
| | | | | | | |
| FINANCING ACTIVITIES | | | | | | |
| Proceeds from issuance of common shares, net (note 16(b)) | | 18,434 | | | (261) | |
| Proceeds from exercise of stock options and warrants | | 7,760 | | | 20,024 | |
| Changes in Project Loan, Credit Facility, and Revolving Facility (note 20(c)) | | | (36,559) | | | (15,752) |
| Interest paid | | (11,797) | | (8,816) | ||
| Lease payments | | | (969) | | | (574) |
| Cash used in financing activities | | (23,131) | | (5,379) | ||
| | | | | | ||
| Effects of exchange rate changes on cash | | (83) | | | (814) | |
| | | | | | | |
| Net increase in cash | | 354 | | | 75,762 | |
| Cash, beginning of year | | 96,278 | | | 20,516 | |
| CASH, END OF YEAR | | $ | 96,632 | | $ | 96,278 |
Supplemental cash flow information (note 20)
The accompanying notes are an integral part of these consolidated financial statements.
Page 8
ORLA MINING LTD.
Consolidated Statements of Changes in Equity
(thousands of United States dollars)
| | | | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Common shares | | Reserves | | | | | | | | | | ||||||||||
| | | | | | | | | | | | | | | | | Accumulated | | | | | | | |
| | | Number of | | | | | Share based | | | | | | | | Other | | | | | | |||
| | | shares | | | | | payments | | Warrants | | | | | Comprehensive | | Accumulated | | | | ||||
| | (thousands) | **** | Amount | **** | reserve | **** | reserve | **** | Total | **** | Income (loss) | **** | deficit | **** | Total | ||||||||
| Balance at January 1, 2022 | 247,600 | | $ | 269,198 | | $ | 10,051 | | $ | 19,255 | | $ | 29,306 | | $ | 2,441 | | $ | (116,528) | | $ | 184,417 | |
| Shares issued pursuant to acquisition of Gold Standard | 43,689 | | | 149,363 | | | — | | | — | | | — | | | — | | — | | | 149,363 | ||
| Share issuance costs | — | | | (261) | | | — | | | — | | | — | | | — | | — | | | (261) | ||
| Replacement options issued | | — | | | — | | | 1,647 | | | — | | | 1,647 | | | — | | | — | | | 1,647 |
| Warrants exercised (note 16) | 10,697 | | | 21,334 | | | — | | | (5,143) | | | (5,143) | | | — | | — | | | 16,191 | ||
| Options exercised (note 18) | 3,675 | | | 6,866 | | | (3,033) | | | — | | | (3,033) | | | — | | — | | | 3,833 | ||
| RSUs redeemed (note 18) | | 36 | | | 138 | | | (138) | | | — | | | (138) | | | — | | | — | | | — |
| RSUs settled in cash (note 18) | | — | | | (1,320) | | | (403) | | | — | | | (403) | | | — | | | — | | | (1,723) |
| RSUs reclassified to cash settled (note 18) | | — | | | — | | | (310) | | | — | | | (310) | | | — | | | — | | | (310) |
| DSUs redeemed (note 18) | | 112 | | | 165 | | | (165) | | | — | | | (165) | | | — | | | — | | | — |
| DSUs settled in cash (note 18) | — | | | (167) | | | (159) | | | — | | | (159) | | | — | | — | | | (326) | ||
| Share based payments (note 18) | — | | — | | 2,407 | | — | | 2,407 | | — | | — | | 2,407 | ||||||||
| Income for the year | — | | | — | | | — | | | — | | | — | | | — | | 45,770 | | | 45,770 | ||
| Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,024) | | — | | | (4,024) | ||
| Balance at December 31, 2022 | 305,809 | | $ | 445,316 | | $ | 9,897 | | $ | 14,112 | | $ | 24,009 | | $ | (1,583) | | $ | (70,758) | | $ | 396,984 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at January 1, 2023 | 305,809 | | $ | 445,316 | | $ | 9,897 | | $ | 14,112 | | $ | 24,009 | | $ | (1,583) | | $ | (70,758) | | $ | 396,984 | |
| Shares issued pursuant to top up right, net (note 16(b)) | 3,987 | | | 18,434 | | | — | | | — | | | — | | | — | | | — | | | 18,434 | |
| Shares issued for property payments | | 62 | | | 242 | | | — | | | — | | | — | | | — | | | — | | | 242 |
| Warrants exercised (note 16) | 1,292 | | | 3,215 | | | — | | | (345) | | | (345) | | | — | | | — | | | 2,870 | |
| Options exercised (note 18) | 3,866 | | | 6,926 | | | (2,036) | | | — | | | (2,036) | | | — | | | — | | | 4,890 | |
| RSUs redeemed (note 18) | 58 | | | 228 | | | (228) | | | — | | | (228) | | | — | | | — | | | — | |
| Share based payments (note 18) | | — | | | — | | | 2,987 | | | — | | | 2,987 | | | — | | | — | | | 2,987 |
| Loss for the year | | — | | | — | | | — | | | — | | | — | | | — | | | (27,010) | | | (27,010) |
| Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 1,144 | | | — | | | 1,144 | |
| Balance at December 31, 2023 | 315,074 | | $ | 474,361 | | $ | 10,620 | | $ | 13,767 | | $ | 24,387 | | $ | (439) | | $ | (97,768) | | $ | 400,541 |
The accompanying notes are an integral part of these consolidated financial statements.
Page 9
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
**1.**CORPORATE INFORMATION AND NATURE OF OPERATIONS
Orla Mining Ltd. was incorporated in Alberta in 2007 and was continued into British Columbia in 2010 and subsequently into Ontario under the Business Corporations Act (Ontario) in 2014. In 2016, the Company was continued as a federal company under the Canada Business Corporations Act. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries. The registered office of the Company is located at Suite 1010, 1075 West Georgia Street, Vancouver, Canada.
The Company is engaged in the acquisition, exploration, development, and exploitation of mineral properties, and holds the Camino Rojo gold and silver mine in Zacatecas State, Mexico, the South Railroad and Lewis gold projects in Nevada, USA, and the Cerro Quema gold project in Panama.
These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company declared commercial production at Camino Rojo, effective April 1, 2022.
**2.**BASIS OF PREPARATION
| (a) | STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION |
|---|
We have prepared these consolidated financial statements of the Company in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial instruments that are measured at fair values at the end of each reporting period, as explained in the material accounting policies information below. The consolidated financial statements are presented in United States dollars.
Our material accounting policies information is provided in note 27. The significant accounting judgements we applied and the significant accounting estimates we used are outlined in note 28.
On March 19, 2024, the Board of Directors approved these consolidated financial statements for issuance.
| (b) | BASIS OF CONSOLIDATION |
|---|
These consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. Where necessary, we have made adjustments to the financial statements of subsidiaries to bring their accounting policies in line with the accounting policies of the consolidated group. We have eliminated all material intercompany transactions, balances, revenues, and expenses upon consolidation.
Subsidiaries are included in the consolidated financial results of the Company from the effective date of acquisition or control and up to the effective date of disposition or loss of control. Control is achieved when the Company has power over the investee, is exposed to or has rights to variable returns from its involvement with an investee and has the ability to affect those returns through its power over the investee.
Orla Mining Ltd. is the ultimate parent entity of the group. At December 31, 2023 and 2022, the main operating subsidiaries of the Company, their geographic locations, and the ownership interests held by the Company, were as follows:
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | Ownership at December 31 | |||||||
| Name | | Principal activity | | 2023 | | 2022 | | Location |
| Minera Camino Rojo SA de CV | Production | 100 | % | 100 | % | Mexico | ||
| Minera Cerro Quema SA | Exploration | 100 | % | 100 | % | Panama | ||
| Gold Standard Ventures (US) Inc. | | Exploration | | 100 | % | 100 | % | USA |
| Madison Enterprises Inc. | | Exploration | | 100 | % | 100 | % | USA |
Page 10
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| 3. | REVENUE |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | | 2023 | 2022 | |||
| Gold | | $ | 230,955 | | $ | 192,394 |
| Silver | | 2,688 | | 836 | ||
| Revenue | | $ | 233,643 | | $ | 193,230 |
| | | | | | | |
| Customer A | | $ | 54,707 | | $ | 129,866 |
| Customer B | | | 70,072 | | | 47,937 |
| Customer C | | | 97,334 | | | — |
| Others | | 11,530 | | 15,427 | ||
| Revenue | | $ | 233,643 | | $ | 193,230 |
**4.**COST OF SALES
(a)OPERATING COSTS
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | 2023 | 2022 | ||||
| Mining and processing costs | | $ | 56,889 | | $ | 44,538 |
| Refining and transportation costs | | 783 | | 1,059 | ||
| | | $ | 57,672 | | $ | 45,597 |
(b)ROYALTIES
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | **** | 2023 | **** | 2022 | ||
| Camino Rojo Oxide 2% NSR royalty | | $ | 4,628 | | $ | 3,818 |
| Mexican 0.5% Extraordinary Mining Duty | | | 1,167 | | | 1,001 |
| | | $ | 5,795 | | $ | 4,819 |
**5.**EXPLORATION AND EVALUATION EXPENSES
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended | ||||
| | | December 31 | ||||
| | **** | 2023 | 2022 | |||
| Camino Rojo | | $ | 8,740 | | $ | 3,765 |
| Nevada (South Railroad, Lewis and Monitor Gold) | | 19,377 | | 7,616 | ||
| Cerro Quema | | 6,001 | | 7,176 | ||
| Other | | 498 | | 382 | ||
| | | $ | 34,616 | | $ | 18,939 |
Page 11
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
**6.**GENERAL AND ADMINISTRATIVE EXPENSES
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | 2023 | 2022 | ||||
| Office and administrative | | $ | 3,552 | | $ | 2,921 |
| Professional fees | | 2,718 | | 2,237 | ||
| Regulatory and transfer agent | | 451 | | 301 | ||
| Salaries and benefits | | 6,687 | | 5,454 | ||
| | | $ | 13,408 | | $ | 10,913 |
**7.**INTEREST AND ACCRETION EXPENSE
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | 2023 | 2022 | ||||
| Interest expense (note 7(a)) | | $ | 10,254 | | $ | 7,368 |
| Accretion expense (note 7(b)) | | 1,584 | | 1,522 | ||
| Interest and accretion expense | | $ | 11,838 | | $ | 8,890 |
(a)INTEREST EXPENSE
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | 2023 | 2022 | ||||
| Credit Facility (note 13(a)) | | $ | 6,030 | | $ | 4,903 |
| Revolving Facility (note 13(b)) | | 2,736 | | — | ||
| Fresnillo obligation (note 13(c)) | | 1,064 | | 1,383 | ||
| Project loan | | | — | | | 869 |
| Interest expense on lease liabilities (note 14) | | | 156 | | | 87 |
| Other | | 268 | | 126 | ||
| | | $ | 10,254 | | $ | 7,368 |
(b)ACCRETION EXPENSE
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended | |||||
| | | December 31 | ||||
| | 2023 | 2022 | ||||
| Credit Facility (note 13(a)) | | $ | 369 | | $ | 387 |
| Accretion of site closure provisions (note 15) | | 539 | | 508 | ||
| Deferred revenue | | | 676 | | | — |
| Newmont loan | | — | | 366 | ||
| Project loan | | — | | 261 | ||
| | | $ | 1,584 | | $ | 1,522 |
Page 12
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
**8.**INVENTORY
| | | | | | | |
|---|---|---|---|---|---|---|
| | December 31, | **** | December 31, | |||
| | 2023 | **** | 2022 | |||
| Current | | | | | | |
| Stockpiled ore | | $ | 913 | | $ | 1,869 |
| In-process inventory | | 20,509 | | 15,961 | ||
| Finished goods inventory | | 4,041 | | 1,406 | ||
| Materials and supplies | | 3,988 | | 3,210 | ||
| Inventory – current | | $ | 29,451 | | $ | 22,446 |
| | | | | | | |
| Long term | | | | | | |
| Stockpiled low grade ore | | $ | 5,627 | | $ | 4,096 |
Long term inventory consists of stockpiled ore that is not expected to be processed within 12 months.
Included within inventory at December 31, 2023 is $9.2 million of depreciation and depletion (December 31, 2022 — $6.3 million).
**9.**VALUE ADDED TAXES RECOVERABLE
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | December 31, | **** | December 31, | ||
| | | 2023 | | 2022 | ||
| Current portion | | $ | 15,571 | | $ | 8,659 |
| Long term portion | | 826 | | 5,229 | ||
| | | $ | 16,397 | | $ | 13,888 |
Value added taxes (“VAT”) paid in Mexico are fully recoverable. However, VAT recovery returns in Mexico are subject to complex filing requirements and detailed audit or review by the fiscal authorities. Consequently, the timing of receipt of refunds is uncertain. We have used judgement in classifying the current and non-current portions of our Mexican VAT receivables. Factors that we considered include (i) the regularity of payments received, (ii) discussions with and communications from the Mexican tax authorities with respect to specific claims, and (iii) the expected length of time for refunds in accordance with Mexico’s regulations.
At December 31, 2023, approximately 13.9 million Mexican pesos ($0.8 million) (December 31, 2022 — $4.4 million) were under dispute with the taxation authorities. This amount is included within long term value added taxes recoverable.
During the fourth quarter of 2023, we reclassified 71.6 million Mexican pesos (US$4.2 million) of VAT from long term to current following the favorable resolution, after the quarter end, of an outstanding dispute with the Mexican tax authorities.
Page 13
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
10.PROPERTY, PLANT AND EQUIPMENT
Our operating property is the Camino Rojo Oxide Gold Mine in Mexico and constitute substantially all our buildings, and machinery and equipment.
| | | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Producing | | | Machinery | | | Other right | | | | | | ||||||||
| | | mineral | | | | | and | | Other | | of use | | Construction | | | | |||||
| | property | Buildings | equipment | assets | assets | **** | in progress | Total | |||||||||||||
| Cost | | | | | | | | | | | | | | | | ||||||
| At January 1, 2022 | | $ | — | | $ | 66 | | $ | 5,238 | | $ | 1,261 | | $ | 2,119 | | $ | — | | $ | 8,684 |
| Additions | | 6,616 | | 1,788 | | 3,272 | | 666 | | 2,300 | | | — | | 14,642 | ||||||
| Transfer from construction | | 127,002 | | | 58,869 | | | 36,684 | | | 608 | | | — | | | — | | | 223,163 | |
| Reclassification of capitalized interest | | (19,020) | | | 11,585 | | | 7,341 | | | 94 | | | — | | | — | | | — | |
| Change in site closure provision (note 15) | | 1,155 | | | (300) | | | (190) | | | — | | | — | | | — | | | 665 | |
| Derecognition of leased assets | | — | | | — | | | — | | | — | | | (215) | | | — | | | (215) | |
| Due to changes in exchange rates | | | — | | | — | | | — | | | (9) | | | (44) | | | — | | | (53) |
| At December 31, 2022 | | | 115,753 | | | 72,008 | | | 52,345 | | | 2,620 | | | 4,160 | | | — | | | 246,886 |
| Additions | | | 12,705 | | | 141 | | | 2,305 | | | 823 | | | 484 | | | 4,881 | | | 21,339 |
| Change in site closure provision (note 15) | | | (559) | | | (927) | | | (593) | | | — | | | — | | | — | | | (2,079) |
| Disposals | | | — | | | — | | | (5) | | | — | | | — | | | — | | | (5) |
| Derecognition of leased assets | | | — | | | — | | | — | | | — | | | (117) | | | — | | | (117) |
| Due to changes in exchange rates | | | — | | | — | | | — | | | 7 | | | 22 | | | — | | | 29 |
| At December 31, 2023 | | $ | 127,899 | | $ | 71,222 | | $ | 54,052 | | $ | 3,450 | | $ | 4,549 | | $ | 4,881 | | $ | 266,053 |
| | | | | | | | | | | | | | | | | | | | | | |
| Accumulated depreciation | | | | | | | | | | ||||||||||||
| At January 1, 2022 | | | — | | | 6 | | | 350 | | | 288 | | | 405 | | | — | | | 1,049 |
| Depletion and depreciation | | 9,641 | | 6,280 | | 4,541 | | 421 | | 764 | | | — | | 21,647 | ||||||
| Derecognition of leased assets | | — | | — | | — | | — | | (215) | | | — | | (215) | ||||||
| Due to changes in exchange rates | | | — | | | — | | | — | | | (4) | | | (7) | | | — | | | (11) |
| At December 31, 2022 | | $ | 9,641 | | $ | 6,286 | | $ | 4,891 | | $ | 705 | | $ | 947 | | $ | — | | $ | 22,470 |
| Disposals | | | — | | | — | | | (5) | | | — | | | — | | | — | | | (5) |
| Depletion and depreciation | | | 13,844 | | | 9,610 | | | 6,789 | | | 563 | | | 1,115 | | | — | | | 31,921 |
| Derecognition of leased assets | | | — | | | — | | | — | | | — | | | (52) | | | — | | | (52) |
| At December 31, 2023 | | $ | 23,485 | | $ | 15,896 | | $ | 11,675 | | $ | 1,268 | | $ | 2,010 | | $ | — | | $ | 54,334 |
| | | | | | | | | | | | | | | | | | | | | | |
| Net book value | | | | | | | | | | | |||||||||||
| At December 31, 2022 | | $ | 106,112 | | $ | 65,722 | | $ | 47,454 | | $ | 1,915 | | $ | 3,213 | | $ | — | | $ | 224,416 |
| At December 31, 2023 | | $ | 104,414 | | $ | 55,326 | | $ | 42,377 | | $ | 2,182 | | $ | 2,539 | | $ | 4,881 | | $ | 211,719 |
Page 14
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
11.EXPLORATION AND EVALUATION PROPERTIES
Our exploration and evaluation properties consist of the Cerro Quema Project in Panama and the Nevada projects (South Railroad, Lewis and Monitor Gold projects in Nevada, United States).
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | **** | South Railroad | **** | | | **** | | | |
| | Cerro Quema | | and Lewis | **** | Monitor Gold | **** | Total | |||||
| At January 1, 2022 | | $ | 82,429 | | $ | — | | $ | 314 | | $ | 82,743 |
| Acquired during 2022 | | | — | | | 160,000 | | | — | | | 160,000 |
| At January 1, 2023 | | $ | 82,429 | | $ | 160,000 | | $ | 314 | | $ | 242,743 |
| Impairments | | | (72,429) | | | — | | | — | | | (72,429) |
| Derecognition | | | — | | | — | | | (314) | | | (314) |
| At December 31, 2023 | | $ | 10,000 | | $ | 160,000 | | $ | — | | $ | 170,000 |
(a)CERRO QUEMA PROJECT
On November 3, 2023, the National Assembly of Panama passed Law 407 that included a moratorium on the granting, renewal, or extension of concessions for the exploration, extraction, or exploitation of metal mining in Panama.
On November 27, 2023, by Resolution 95, 96, and 97, the Panamanian Ministry of Commerce and Industry (“MICI”) formally rejected the Company’s requests for extension for the three mining concessions for the extraction of metallic minerals Class IV (gold and silver) comprising the Cerro Quema Project, declared the concessions cancelled and declared the area comprising the concessions to be a reserve area. On December 15, 2023, MICI notified the Company of the November 27, 2023, resolutions by means of an edict no. 021-2023 (notificación por edicto for its Spanish acronym). Accordingly, we determined that this was an impairment indicator for the Cerro Quema Project. We then assessed, for accounting purposes, the recoverable amount of the project based on its fair value less costs to dispose (“FVLCD”). As a result of this impairment assessment, we recognized an accounting impairment of $72.4 million at Cerro Quema during the quarter ended December 31, 2023 (2022 – nil).
Our estimate of FVLCD is classified as Level 3 in the fair value hierarchy as the inputs used are not based on observable market data.
(i)Key assumptions
In evaluating the facts, circumstances, and the significant uncertainties associated with mining in Panama, we did not include any estimated future cash flows from activities involving the exploration, extraction, or exploitation of metal mining, since these activities were legally prohibited as at December 31, 2023 and at the date of these financial statements. The recoverable amount of the Cerro Quema cash-generating unit of $10.0 million was determined based on an estimated FVLCD. This estimate was determined by an independent valuator. The valuation considered current commercial demand in the real estate market, recent transactions within the sector and neighboring areas, and the property’s physical attributes, including its location, condition, topography, and accessibility.
(ii)Sensitivities
Changes in market conditions could affect the commercial demand in the real estate market that could result in a materially different FVLCD.
In the event that there is a change in the facts and circumstances surrounding the moratorium on concessions and the status of Cerro Quema’s mineral concessions, an assessment will be performed to determine whether there are any indications that the accounting impairment may no longer exist or may have changed. If any such indication exists, we will estimate the recoverable amount of the Cerro Quema asset at that time, which may lead to either a further impairment or a reversal of part or all of the impairment loss that had been recognized to that point.
The accounting impairment has been recorded without attributing any specific value to any legal remedies that may be obtained through any arbitration proceedings or otherwise. There can be no assurance that any such legal remedies will be successful. Page 15
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b)MONITOR GOLD PROJECT
In December 2023, the Company elected to discontinue its earn-in agreements at the Monitor Gold Project. Accordingly, we derecognized $0.3 million which had been capitalized in previous years in respect of this project.
12.TRADE PAYABLES AND ACCRUED LIABILITIES
| | | | | | | |
|---|---|---|---|---|---|---|
| | December 31, | December 31, | ||||
| | | 2023 | | 2022 | ||
| Trade payables | | $ | 5,739 | | $ | 6,707 |
| Royalties payable (note 4(b)) | | | 2,466 | | | 2,119 |
| Goods or services received awaiting vendor invoices | | | 4,054 | | | 3,139 |
| Payroll related | | 6,532 | | 3,380 | ||
| Current portion of lease obligations (note 14) | | 915 | | 846 | ||
| Accrued interest payable (notes 13(a) and 13(b)) | | 59 | | 1,660 | ||
| RSUs expected to be cash settled (note 18(b)) | | | — | | | 352 |
| Other | | 891 | | 1,472 | ||
| | | $ | 20,656 | | $ | 19,675 |
13.DEBT
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Credit Facility | **** | Revolving Facility | **** | Fresnillo obligation | **** | Total | ||||
| | | note 13(a) | | note 13(b) | | note 13(c) | | | ||||
| At December 31, 2023 | | | | | ||||||||
| Current | | $ | — | | $ | — | | $ | — | | $ | — |
| Non-current | | — | | 88,350 | | — | | 88,350 | ||||
| Total | | $ | — | | $ | 88,350 | | $ | — | | $ | 88,350 |
| | | | | | | | | | | | | |
| At December 31, 2022 | | | | | ||||||||
| Current | | $ | 22,200 | | $ | — | | $ | 22,800 | | $ | 45,000 |
| Non-current | | 100,795 | | — | | — | | 100,795 | ||||
| Total | | $ | 122,995 | | $ | — | | $ | 22,800 | | $ | 145,795 |
| (a) | CREDIT FACILITY |
|---|
In April 2022, the Company entered into a credit facility (the “Credit Facility”) consisting of a $100 million term facility and a $50 million revolving facility through a syndicate of lenders. The Credit Facility consisted of two parts, namely (1) a $100 million term facility with a five-year term, repayable in 18 equal quarterly instalments, and (2) a $50 million revolving facility. The revolving portion of the Credit Facility had a three-year term. The Company used a portion of the proceeds of the Credit Facility to repay the Camino Rojo project loan in full. The remaining Camino Rojo project loan unamortized transaction costs of $10.7 million and the early repayment premium of $2.5 million were expensed. Page 16
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
In August 2023, the term facility was extinguished in its entirety and the amounts due thereunder were transferred to a new $150 million revolving facility (the “Revolving Facility”) (note 13(b)). As a result of this change in the Company’s debt, we wrote off $1.1 million of unamortized transaction costs of the Credit Facility and expensed $0.5 million in additional costs and fees.
| | | | | | | |
|---|---|---|---|---|---|---|
| | Year ended December 31 | |||||
| | 2023 | 2022 | ||||
| At January 1 | | $ | 122,995 | | $ | — |
| Advances received during the year | | — | | 130,000 | ||
| Transaction costs paid, accreted over the life | | — | | (1,866) | ||
| Interest expensed during the year (note 7(a)) | | | 6,030 | | | 4,903 |
| Accretion during the year (note 7(b)) | | 369 | | | 387 | |
| Interest paid during the year | | (6,030) | | (4,879) | ||
| Principal repayments during the year | | (11,100) | | (5,550) | ||
| Converted from Credit Facility to Revolving Facility (note (b)) | | | (113,350) | | | — |
| Unamortized transaction costs expensed upon conversion to Revolving Facility | | | 1,086 | | | — |
| At December 31 | | $ | — | | $ | 122,995 |
| | | | | | | |
| Current | | $ | — | | $ | 22,200 |
| Non-current | | — | | 100,795 | ||
| At December 31 | | $ | — | | $ | 122,995 |
| (b) | REVOLVING FACILITY |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | Year ended December 31 | ||||
| | | 2023 | **** | 2022 | ||
| At January 1 | | $ | — | | $ | — |
| Converted from Credit Facility to Revolving Facility (note (a)) | | 113,350 | | — | ||
| Interest expensed during the year (note 7(a)) | | 2,736 | | — | ||
| Interest paid during the year | | (2,736) | | — | ||
| Principal repayments during the year | | (25,000) | | — | ||
| At December 31 | | $ | 88,350 | | $ | — |
| | | | | | | |
| Current | | $ | — | | $ | — |
| Non-current | | 88,350 | | — | ||
| At December 31 | | $ | 88,350 | | $ | — |
The Revolving Facility has a four-year term maturing on August 28, 2027, with an option to increase this facility to $200 million, subject to certain conditions.
The applicable interest rate for the Revolving Facility is based on the term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin ranging from 2.50% to 3.75% based on the Company’s leverage ratio at the end of each fiscal quarter. The average interest rate paid on the Revolving Facility during 2023 was 7.9% per annum (2022 – not applicable).
A standby fee is payable on the undrawn portion of the Revolving Facility. The standby fee is charged at 0.56% to 0.84% depending on the leverage ratio. At December 31, 2023, the undrawn amount was $61.7 million.
We may prepay all or any portion of the amounts owed under the Revolving Facility without penalty.
The Revolving Facility is secured by the Company’s present and future assets, property and all proceeds thereof, other than present and future assets owned by Minera Cerro Quema which is excluded from the collateral. The Company is prohibited from declaring, paying or setting aside for payment any dividends unless certain financial covenants and ratios are met. Page 17
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
The Revolving Facility includes covenants customary for a facility of this nature, including compliance with customary restrictive covenants, and the following financial covenants all as defined in the related agreements:
| ● | maintaining a leverage ratio at less than or equal to 3.50, |
|---|---|
| ● | an interest service coverage ratio at greater than or equal to 4, |
| --- | --- |
| ● | a tangible net worth greater than or equal to $278.6 million, and |
| --- | --- |
| ● | minimum liquidity in an amount greater than or equal to $15 million. |
| --- | --- |
As at December 31, 2023, the Company was in compliance with all covenants.
| (c) | FRESNILLO OBLIGATION |
|---|
Pursuant to the terms of the Layback Agreement, we agreed to pay Fresnillo total cash consideration of $62.8 million in three payments as follows: (i) $25.0 million upon closing of the transaction; (ii) $15.0 million on December 1, 2022; and (iii) $22.8 million on December 1, 2023. Each of these payments was made, and at December 31, 2023 no amounts were outstanding under this obligation (December 31, 2022 – $22.8 million).
The amounts payable bore interest at 5% per annum, payable quarterly. To March 31, 2022, we capitalized the interest on this loan to “Mineral properties”. On April 1, 2022, we commenced commercial production at the Camino Rojo Oxide Gold Mine and began to expense the interest on this obligation.
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | | 2023 | | 2022 | ||
| At January 1 | | $ | 22,800 | | $ | 37,800 |
| Interest capitalized during the year | | — | | | 473 | |
| Interest expensed during the year (note 7(a)) | | 1,064 | | | 1,383 | |
| Interest paid during the year | | (1,064) | | | (1,856) | |
| Principal repayments during the year | | | (22,800) | | | (15,000) |
| At December 31 | | $ | — | | $ | 22,800 |
| | | | | | | |
| Current | | $ | — | | $ | 22,800 |
| Non-current | | | — | | — | |
| At December 31 | | $ | — | | $ | 22,800 |
| 14. | LEASE OBLIGATIONS |
|---|
The Company has lease contracts for mining equipment, vehicles and buildings. Leases of mining equipment have lease terms of five years, while vehicles and buildings generally have lease terms between three and five years. Page 18
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (a) | LEASE OBLIGATIONS |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | 2023 | **** | 2022 | |||
| Beginning of year | | $ | 3,173 | | $ | 1,401 |
| Additions | | 484 | | 2,300 | ||
| Interest expense (note 7(a)) | | 156 | | 87 | ||
| Lease payments | | (1,125) | | (661) | ||
| Due to changes in exchange rates | | 220 | | 46 | ||
| End of year | | $ | 2,908 | | $ | 3,173 |
| | | | | | | |
| Current (note 12) | | $ | 915 | | $ | 846 |
| Non-current | | 1,993 | | 2,327 | ||
| | | $ | 2,908 | | $ | 3,173 |
| (b) | LEASE EXPENSES RECOGNIZED |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | 2023 | **** | 2022 | |||
| Interest on lease liabilities | | $ | 156 | | $ | 87 |
| Variable lease payments not included in the measurement of lease liabilities | | 12,905 | | 15,586 | ||
| Expenses relating to short-term leases | | 241 | | 168 | ||
| Expenses relating to leases of low-value assets, excluding short-term leases | | 79 | | 108 | ||
| | | $ | 13,381 | | $ | 15,949 |
| 15. | SITE CLOSURE PROVISIONS |
|---|
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Nevada | | Cerro Quema | | | | |||
| | Camino Rojo | projects | Project | Total | ||||||||
| At December 31, 2021 | | $ | 5,117 | | $ | — | | $ | 343 | | $ | 5,460 |
| Acquisition of Gold Standard | | | — | | | 1,603 | | | — | | | 1,603 |
| Changes in cost estimates | | | 351 | | | — | | | — | | | 351 |
| Change in estimated cash flows resulting from current activities | | | 427 | | | — | | | — | | | 427 |
| Remediation activities conducted during the year | | | (88) | | | — | | | — | | | (88) |
| Accretion during the year (note 7(b)) | | | 494 | | | 14 | | | — | | | 508 |
| At December 31, 2022 | | | 6,301 | | | 1,617 | | | 343 | | | 8,261 |
| Changes in cost estimates | | | (1,996) | | | 463 | | | 157 | | | (1,376) |
| Accretion during the year (note 7(b)) | | | 521 | | | 18 | | | — | | | 539 |
| At December 31, 2023 | | $ | 4,826 | | $ | 2,098 | | $ | 500 | | $ | 7,424 |
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | December 31, 2023 | | December 31, 2022 | |||||||||||||||
| | | | | | | | | Cerro | | | | | | | | Cerro | ||
| | | | | | Nevada | | Quema | | | | | Nevada | | Quema | ||||
| | Camino Rojo | | projects | | Project | Camino Rojo | | projects | | Project | ||||||||
| Estimated settlement dates | | | 2033 to 2047 | | | 2034 | | | | | | 2033 to 2047 | | | 2034 | | | |
| Undiscounted risk-adjusted cash flows | | $ | 9,765 | | $ | 2,336 | | $ | 500 | | $ | 8,644 | | $ | 1,724 | | $ | 343 |
| Inflation rate | | 3.7 | % | | 2.6 | % | — | | | 7.0 | % | | 2.7 | % | — | |||
| Discount rate | | 9.8 | % | | 3.6 | % | — | | | 9.6 | % | | 3.2 | % | — |
Page 19
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
16.SHARE CAPITAL
| (a) | AUTHORIZED SHARE CAPITAL |
|---|
The Company’s authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.
| (b) | ISSUED SHARE CAPITAL |
|---|
On May 11, 2023, pursuant to the Investor Rights Agreement between Agnico Eagle Mines Limited (“Agnico Eagle”) and the Company, Agnico Eagle partially exercised its top-up right and subscribed for 3,987,241 common shares of the Company at a price of C$6.27 per common share, for proceeds of C$25,000,000 ($18,551,000). The Company incurred transaction costs of C$156,000 ($117,000).
| (c) | WARRANTS |
|---|
The following summarizes information about the warrants outstanding during the year.
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Exercise | | December 31, | | | | | | | | December 31, | ||||
| Expiry date | price | 2022 | Exercised | Expired | 2023 | ||||||||||
| December 18, 2026 | C$ | 3.00 | | 29,545,000 | **** | | (1,291,800) | | — | | 28,253,200 | ||||
| | | | | | | | | | | | | | | | |
| Weighted average exercise price | | | C$ | 3.00 | **** | C$ | 3.00 | C$ | — | C$ | 3.00 |
Page 20
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
17.EARNINGS (LOSS) PER SHARE
Earnings (loss) per share has been calculated using the weighted average number of common shares outstanding for the years ended December 31, 2023 and 2022 as follows:
(a)BASIC
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | 2023 | 2022 | ||||
| Income (loss) for the year | | $ | (27,010) | | $ | 45,770 |
| Weighted average number of common shares (thousands) | | 311,482 | | 272,202 | ||
| Basic earnings (loss) per share | | $ | (0.09) | | $ | 0.17 |
(b)DILUTED
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | 2023 | 2022 | ||||
| Income (loss) for the year | | $ | (27,010) | | $ | 45,770 |
| | | | | | | |
| Weighted average number of common shares (thousands) | | 311,482 | | 272,202 | ||
| Dilutive potential ordinary shares | | | | | | |
| Warrants | | — | | 14,526 | ||
| Options | | — | | 4,544 | ||
| RSUs | | — | | 392 | ||
| DSUs | | — | | 652 | ||
| Bonus shares | | — | | 500 | ||
| Weighted average number of ordinary shares | | 311,482 | | 292,816 | ||
| | | | | | | |
| Diluted earnings (loss) per share | | $ | (0.09) | | $ | 0.16 |
Potential ordinary shares arising from warrants (13,026,000), stock options (2,383,000), RSUs (375,000), DSUs (648,000) and 500,000 bonus shares are not included in the calculation of diluted loss per share for the year ended December 31, 2023 because their effect would be anti-dilutive.
18.SHARE-BASED PAYMENTS
The Company has five different forms of share-based payments for eligible recipients – stock options, restricted share units (“RSUs”), deferred share units (“DSUs”), performance share units ("PSUs"), and bonus shares. The bonus shares have fully vested but have not yet been issued.
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| Share-based payments expense | | 2023 | | 2022 | ||
| Stock options (note 18(a)) | $ | 1,342 | $ | 1,396 | ||
| Restricted share units (note 18(b)) | | 1,135 | | 743 | ||
| Deferred share units (note 18(c)) | | 623 | | 308 | ||
| Performance share units (note 18(d)) | | | 121 | | | — |
| Share based payments expense | | $ | 3,221 | | $ | 2,447 |
Page 21
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (a) | STOCK OPTIONS |
|---|
Stock options granted by the Company prior to 2022 typically had a five-year life, with one third each vesting on grant date, and one year and two years after grant date. Commencing in 2022, stock options granted by the Company have a five-year life, with one third each vesting one, two, and three years after grant date.
Stock options of Gold Standard Ventures Inc. (“Gold Standard”) that were outstanding at the acquisition date of August 12, 2022 were exchanged for options to acquire common shares of Orla (“Replacement Options”), resulting in the issuance of 1,758,334 Replacement Options, which are exercisable until their original expiry dates. For those individuals who did not continue on with Orla, the expiry date is capped at August 12, 2024.
| | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||||||
| | | 2023 | | 2022 | ||||||
| | | | | Weighted | | | | Weighted | ||
| | | | | average | | | | average | ||
| Stock options outstanding | Number | **** | exercise price | Number | exercise price | |||||
| Outstanding, January 1 | 9,178,889 | C$ | 3.71 | 9,900,874 | C$ | 1.86 | ||||
| Replacement options | | — | | | — | | 1,758,334 | | | 8.43 |
| Granted | 457,260 | | 6.57 | 1,278,264 | | 5.56 | ||||
| Exercised | (3,866,208) | | 1.71 | (3,674,769) | | 1.34 | ||||
| Expired, forfeited or cancelled | (246,644) | | 13.14 | (83,814) | | 16.81 | ||||
| Outstanding, December 31 | 5,523,297 | C$ | 4.93 | 9,178,889 | C$ | 3.71 | ||||
| | | | | | | | | | | |
| Vested, December 31 | 4,308,120 | C$ | 4.64 | 7,701,986 | C$ | 3.38 |
The stock options granted during the year ended December 31, 2023 had a grant date fair value of C$1.4 million ($1.0 million) using the Black Scholes option pricing model with the following weighted average assumptions:
| ● | Share prices at grant dates - C$6.58 and C$6.07, expected volatility 50%, expected life – 5 years, risk free interest rate 3.0% and expected dividends – nil. |
|---|
The stock options granted during the year ended December 31, 2022 had a grant date fair value of C$4.1 million ($3.1 million) using the Black Scholes option pricing model with the following weighted average assumptions:
| ● | Share price at grant date ranging from C$3.71 to C$5.98, expected volatility 46%, expected life – 3 years, risk free interest rate 2.9% and expected dividends – nil. |
|---|
Page 22
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
The stock options outstanding at December 31, 2023, were as follows:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | Weighted | | | | | | **** | |
| | | average remaining | | Range of exercise | | Number | |||
| Weighted average remaining contractual life | | life (years) | | prices (C) | | outstanding | |||
| Less than 3 months | | 0.2 | | | | $ | 1.06 | 476,168 | |
| | | 0.1 | | | | $ | 14.59 | 112,611 | |
| 4 to 12 months | | 0.6 | | | | $ | 1.65 | 20,000 | |
| | | 0.6 | | | | $ | 4.78 | 311,331 | |
| | | 0.6 | | – | $ | 7.78 | 705,210 | ||
| | | 0.6 | | | | $ | 8.81 | 140,114 | |
| 13 to 24 months | | 1.3 | | – | $ | 3.82 | 1,118,792 | ||
| | | 1.7 | | | | $ | 5.80 | 50,000 | |
| | | 1.7 | | – | $ | 7.63 | 205,964 | ||
| | | 1.2 | | – | $ | 8.81 | 22,086 | ||
| 25 to 36 months | | 2.3 | | – | $ | 4.80 | 637,674 | ||
| | | 2.1 | | – | $ | 7.43 | 50,388 | ||
| More than 3 years | | 3.5 | | – | $ | 3.88 | 76,580 | ||
| | | 3.4 | | – | $ | 5.98 | 1,139,119 | ||
| | | 4.2 | | – | $ | 6.58 | 457,260 | ||
| | | 1.9 | | – | $ | 14.59 | 5,523,297 |
All values are in US Dollars.
| (b) | RESTRICTED SHARE UNITS |
|---|
Restricted Share Units (“RSU’s) awarded by the Company typically vest one-third each one, two, and three years after award date.
| | | | | |
|---|---|---|---|---|
| | **** | Year ended December 31 | ||
| Number of RSUs outstanding: | | 2023 | **** | 2022 |
| Outstanding, January 1 | 443,267 | 707,840 | ||
| Awarded | 295,429 | 172,301 | ||
| Vested and settled | (152,203) | (402,430) | ||
| Forfeitures during the year | | (6,274) | | (34,444) |
| Outstanding, December 31 | 580,219 | 443,267 |
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | Number vesting in the year | ||||||||
| Number of RSUs outstanding: | Total | 2022 | 2023 | 2024 | **** | 2025 | 2026 | |||||
| Outstanding, December 31, 2022 | 443,267 | — | 262,738 | 126,812 | | 53,717 | — | |||||
| Outstanding, December 31, 2023 | 580,219 | N/A | — | 333,720 | | 150,102 | 96,397 |
Restricted Share Units (“RSUs”) are valued based on the closing price of the Company’s common shares on the trading day immediately prior to award. Certain RSUs may be settled in cash at the option of the Company.
During the year ended December 31, 2023, the Company elected to settle 94,063 RSUs in cash for $0.5 million (2022 — 365,935 RSUs cash-settled for $1.7 million).
As at December 31, 2023, all RSU’s outstanding were accounted for as equity-settled (December 31, 2022 – 349,204 were accounted for as equity-settled and 94,063 were accounted for as cash settled). Page 23
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (c) | DEFERRED SHARE UNITS |
|---|
Deferred Share Units (“DSUs”) are awarded by the Company to directors. These DSUs vest immediately but are not settled until the end of the director’s tenure. They may be settled in cash or common shares at the option of the Company. DSUs are valued using the closing price of the Company's common shares immediately prior to award.
| | | | | |
|---|---|---|---|---|
| | **** | Year ended December 31 | ||
| Number of DSUs outstanding: | **** | 2023 | **** | 2022 |
| Outstanding, January 1 | 559,725 | 707,028 | ||
| Awarded and vested immediately | 142,202 | 69,290 | ||
| Settled during the year | | — | | (216,593) |
| Outstanding, December 31 | 701,927 | 559,725 | ||
| | | | | |
| Vested, December 31 | 701,927 | 559,725 |
During the year ended December 31, 2023, there were no settlements of DSUs (2022 - the Company elected to settle 104,759 DSUs in cash for $330,000). No further cash settlements are expected.
(d)PERFORMANCE SHARE UNITS
In March 2023, the Board of Directors approved a performance share unit (“PSUs”) plan for certain officers of the Company. The PSUs cliff vest after three years and are settled in cash. The cash payment upon vesting will be based on the number of PSUs, multiplied by the five-day volume weighted average price of the Company’s shares upon vesting, which is then multiplied by a “performance percentage”. The performance percentage ranges from 0% to 200% based on the Company’s total shareholder return compared to a peer group, consisting of the constituents of the S&P/TSX Global Gold Index.
We recognize share-based compensation expense related to these PSUs over the vesting period. We adjust the amount recognized at each reporting period to reflect changes in quoted market values of the Company and the peer group, the lapsed portion of the vesting period, the number of PSUs expected to vest, and the expected performance percentage.
On March 27, 2023, the Company issued a total of 198,737 PSUs with an estimated aggregate grant date fair value of $1.3 million.
| | | | | |
|---|---|---|---|---|
| Number of PSUs outstanding: | Year ended December 31 | |||
| | | 2023 | | 2022 |
| Outstanding, January 1 | — | — | ||
| Granted during the year | 198,737 | — | ||
| Outstanding, December 31 | 198,737 | — | ||
| | | | | |
| Vested, December 31 | — | — |
(e)BONUS SHARES
During 2017, the Board of Directors awarded 500,000 common shares to the non‐executive Chairman of the Company as bonus shares. The bonus shares were subject to a vesting period from June 19, 2017, to June 18, 2020 (the “Eligibility Period”). Although the bonus shares have vested, they will become issuable (1) when the non‐executive Chairman ceases to act as a director of the Company, or (2) upon a change of control of the Company. Page 24
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
19.RELATED PARTY TRANSACTIONS
The Company’s related parties include:
| | | |
|---|---|---|
| Related party | **** | Nature of the relationship |
| Key management personnel | | Key management personnel are the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, Chief Sustainability Officer, the Senior Vice President Exploration, and members of the Board of Directors of the Company. |
| (a) | KEY MANAGEMENT PERSONNEL |
|---|
Compensation to key management personnel was as follows:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| **** | **** | 2023 | 2022 | |||
| Salaries and short term incentives | | $ | 3,439 | | $ | 3,871 |
| Directors’ fees | | 366 | | 291 | ||
| Share based payments | | 1,895 | | 1,987 | ||
| | | $ | 5,700 | | $ | 6,149 |
| (b) | TRANSACTIONS |
|---|
The Company had no other material transactions with related parties other than key management personnel during the years ended December 31, 2023, and 2022.
| (c) | OUTSTANDING BALANCES AT THE REPORTING DATE |
|---|
At December 31, 2023, estimated accrued short term incentive compensation totaled $1.4 million and is included in accrued liabilities (December 31, 2022 – $1.1 million).
20.SUPPLEMENTAL CASH FLOW INFORMATION
| (a) | CASH AND CASH EQUIVALENTS |
|---|
Cash and cash equivalents consists of bank current accounts and cash on hand.
| (b) | CHANGES IN NON-CASH WORKING CAPITAL |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | Year ended December 31 | ||||
| | | 2023 | 2022 | |||
| Accounts receivable and prepaid expenses | | | (294) | | | (47) |
| Inventory | | | (5,635) | | | (9,177) |
| Valued added taxes recoverable | | | (574) | | | (8,044) |
| Trade payables and accrued liabilities | | | 2,904 | | | 1,487 |
| Changes in non-cash working capital | | | (3,599) | | | (15,781) |
Page 25
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(c)CHANGES IN PROJECT LOAN, CREDIT FACILITY, AND REVOLVING FACILITY
| | | | | |
|---|---|---|---|---|
| | **** | Year ended December 31 | ||
| | | 2023 | **** | 2022 |
| Repayment of the Newmont loan | — | (10,836) | ||
| Repayment of the Camino Rojo project loan | — | (127,500) | ||
| Proceeds from Credit Facility, net of transaction costs (note 13(a)) | — | 128,134 | ||
| Principal repayments of Credit Facility (note 13(a)) | (11,100) | (5,550) | ||
| Extinguishment of the Credit Facility (note 13(a)) | (113,350) | — | ||
| Proceeds from the Revolving Facility, net of transaction costs (note 13(b)) | 113,350 | — | ||
| Principal repayments of the Revolving Facility (note 13(b)) | (25,000) | — | ||
| Revolving facility cash transaction costs (note 13(a)) | | (459) | | — |
| Cash flow effect of changes In Project Loan, Credit Facility, and Revolving Facility | (36,559) | (15,752) |
(d)NON-CASH INVESTING AND FINANCING ACTIVITIES
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| | **** | 2023 | **** | 2022 | ||
| Financing activities | **** | | **** | **** | | |
| Stock options exercised, credited to share capital with an offset to reserves | $ | 2,036 | $ | 3,033 | ||
| Warrants exercised, credited to share capital with an offset to reserves | | 345 | | 5,143 | ||
| Common shares issued on maturity of RSUs, credited to share capital with an offset to reserves | | 228 | | 541 | ||
| Common shares issued on maturity of DSUs, credited to share capital with an offset to reserves | | — | | 324 | ||
| | | | | | | |
| Investing activities | **** | | | **** | | |
| Common shares issued pursuant to the acquisition of Gold Standard, credited to share capital with an offset to the assets acquired and liabilities assumed | | — | | 149,363 | ||
| Replacement options issued pursuant to the acquisition of Gold Standard, credited to reserves with an offset to the assets acquired and liabilities assumed | | | — | | | 1,647 |
| Initial recognition of right of use assets, with an offset to lease obligation | | 484 | | 2,300 |
21.SEGMENT INFORMATION
| (a) | REPORTABLE SEGMENTS |
|---|
The operating and reportable segments of the Company are based on the reports which are reviewed by the chief operating decision maker (“CODM”) in making strategic resource allocation decisions. These operating segments are (1) the Camino Rojo Mine, (2) the Cerro Quema project, (3) the Nevada projects and (4) the corporate office. The operating segments other than corporate office are each managed by a dedicated General Manager and management team. The corporate office oversees the plans and activities of early-stage exploration projects. Page 26
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (b) | GEOGRAPHIC SEGMENTS |
|---|
We conduct our activities in four geographic areas: Mexico, Panama, Nevada USA, and Canada (Corporate).
(i)Income (loss) for the year by segment
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Mexico | Panama | Nevada | Corporate | Total | ||||||||||
| Year ended December 31, 2023 | | | | | | | | | | | | | | | |
| Revenue (note 3) | | $ | 233,451 | | $ | — | | $ | — | | $ | 192 | | $ | 233,643 |
| Cost of sales | | | (92,047) | | | — | | | — | | | (69) | | | (92,116) |
| Earnings from mining operations | | | 141,404 | | | — | | | — | | | 123 | | | 141,527 |
| Exploration and evaluation expenses (note 5) | | | (8,740) | | | (6,001) | | | (19,377) | | | (498) | | | (34,616) |
| General and administrative expenses (note 6) | | — | | — | | — | | (13,408) | | (13,408) | |||||
| Interest income | | 4,134 | | — | | — | | 1,253 | | 5,387 | |||||
| Depreciation | | (66) | | (40) | | (138) | | (260) | | (504) | |||||
| Share based payments (note 18) | | (170) | | (86) | | (317) | | (2,648) | | (3,221) | |||||
| Interest and accretion expense | | (1,648) | | — | | (795) | | (9,395) | | (11,838) | |||||
| Loss on extinguishment of Credit Facility | | — | | — | | — | | (1,547) | | (1,547) | |||||
| Foreign exchange and other gain (loss) | | | (704) | | | — | | | — | | | (739) | | | (1,443) |
| Impairment or derecognition of exploration properties | | | — | | | (72,429) | | | (314) | | | — | | | (72,743) |
| Income taxes | | | (33,002) | | | — | | | — | | | (1,602) | | | (34,604) |
| Income (loss) for the year | | $ | 101,208 | | $ | (78,556) | | $ | (20,941) | | $ | (28,721) | | $ | (27,010) |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Mexico | Panama | USA | Corporate | Total | ||||||||||
| Year ended December 31, 2022 | | | | | | | | | | | | | | | |
| Revenue (note 3) | | $ | 193,109 | | $ | — | | $ | — | | $ | 121 | | $ | 193,230 |
| Cost of sales | | (65,320) | | — | | — | | (49) | | (65,369) | |||||
| Earnings from mining operations | | 127,789 | | — | | — | | 72 | | 127,861 | |||||
| Exploration and evaluation expenses (note 5) | | (3,765) | | (7,176) | | (7,616) | | (382) | | (18,939) | |||||
| General and administrative expenses (note 6) | | — | | — | | — | | (10,913) | | (10,913) | |||||
| Interest income | | | 1,844 | | | — | | | — | | | 323 | | | 2,167 |
| Depreciation | | (23) | | (15) | | (45) | | (194) | | (277) | |||||
| Share based payments (note 18) | | | (37) | | | (70) | | | — | | | (2,340) | | | (2,447) |
| Interest and accretion expense | | | (2,315) | | | — | | | (35) | | | (6,540) | | | (8,890) |
| Loss on extinguishment of Project Loan | | | — | | | — | | | — | | | (13,219) | | | (13,219) |
| Foreign exchange and other gain (loss) | | | (778) | | | — | | | 76 | | | 3,757 | | | 3,055 |
| Income taxes | | | (29,478) | | | — | | | — | | | (3,150) | | | (32,628) |
| Income (loss) for the year | | $ | 93,237 | | $ | (7,261) | | $ | (7,620) | | $ | (32,586) | | $ | 45,770 |
(ii)Assets by segment
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At December 31, 2023 | **** | Mexico | **** | Panama | **** | Nevada | **** | Corporate | **** | Total | |||||
| Property, plant and equipment | | $ | 210,339 | | $ | — | | $ | 525 | | $ | 855 | | $ | 211,719 |
| Exploration and evaluation properties | | **** | — | | 10,000 | | 160,000 | | — | | 170,000 | ||||
| Total assets | | | 336,374 | | | 10,673 | | | 161,137 | | | 27,594 | | | 535,778 |
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At December 31, 2022 | **** | Mexico | **** | Panama | **** | Nevada | **** | Corporate | **** | Total | |||||
| Property, plant and equipment | | $ | 222,767 | | $ | 39 | | $ | 577 | | $ | 1,033 | | $ | 224,416 |
| Exploration and evaluation properties | | — | | 82,429 | | 160,314 | | — | | 242,743 | |||||
| Total assets | | | 348,390 | | | 83,291 | | | 163,857 | | | 18,278 | | | 613,816 |
Page 27
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
22.CAPITAL MANAGEMENT
| (a) | OBJECTIVES |
|---|
Our objectives when managing capital are to safeguard the Company’s ability to continue as a going concern to pursue the exploration, evaluation, development, and exploitation of our mineral properties and to maintain a flexible capital structure.
We manage our capital structure and adjust it considering changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the Company’s capital structure, we may issue new shares, take on additional debt or repay outstanding debt, or acquire or dispose of assets. We currently do not pay regular dividends.
Our ability to carry out our long-range strategic objectives in future periods depends on our ability to generate positive cash flows from our mining operations and to raise financing from lenders, shareholders, and new investors. We regularly review and consider financing alternatives to fund the Company’s ongoing operational, exploration and development activities.
| (b) | INVESTMENT POLICY |
|---|
Our investment policy is to invest the Company’s excess cash in low-risk financial instruments such as demand deposits and savings accounts with major Canadian banks. By using this strategy, the Company preserves its cash resources and can marginally increase these resources with low risk through the yields on these investments. Our financial instruments are exposed to certain financial risks, which include currency risk, credit risk, and liquidity risk.
23.FINANCIAL INSTRUMENTS
| (a) | FAIR VALUE HIERARCHY |
|---|
To provide an indication of the reliability of the inputs used in determining fair value, we classify our financial instruments into the three levels prescribed by the accounting standards.
| Level 1 | The fair value of financial instruments traded in active markets (such as publicly traded equity securities) is based on quoted (unadjusted) market prices as at the reporting date. The quoted market price used for financial assets held by the Company is the closing trading price on the reporting date. Such instruments are included in Level 1. |
|---|---|
| Level 2 | The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, we include that instrument in Level 2. |
| --- | --- |
| Level 3 | If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. |
| --- | --- |
The carrying value of cash and cash equivalents, trade and other receivables, restricted cash, trade payables and accrued liabilities approximates the fair value due to the short-term nature of the instruments. The fair values of the Credit Facility, the Revolving Facility, and the Fresnillo obligation are determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.
The fair value of the Revolving Facility at December 31, 2023 was estimated at $88.4 million using a discount rate of 7.9%. Page 28
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
At December 31, 2023, the carrying values and fair values of our financial instruments by category were as follows:
| | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | Fair value | |||||||||||||
| | | | | Carrying | | | | | | | | Short term | | Total | ||||||
| | | Classification | value | Level 1 | Level 2 | Level 3 | nature | fair value | ||||||||||||
| Financial assets | | | | | | | ||||||||||||||
| Cash and cash equivalents | | FVTPL | | $ | 96,632 | | $ | 96,632 | | $ | — | | $ | — | | $ | — | | $ | 96,632 |
| Accounts receivable | | Amortized cost | | | 316 | | | 18 | | | — | | | — | | | 298 | | | 316 |
| Restricted cash | | Amortized cost | | | 1,011 | | | 1,011 | | | — | | | — | | | — | | | 1,011 |
| | | $ | 97,959 | $ | 97,661 | | $ | — | | $ | — | | $ | 298 | | $ | 97,959 | |||
| | | | | | | | | | | | | | ||||||||
| Financial liabilities | | | | | | | | | | | | | ||||||||
| Trade and other payables | Amortized cost | | $ | 8,219 | | $ | — | | $ | — | | $ | — | | $ | 8,219 | | $ | 8,219 | |
| Accrued liabilities | | Amortized cost | | | 9,541 | | | 122 | | | — | | | — | | | 9,419 | | | 9,541 |
| Lease obligation | Amortized cost | | 2,908 | | — | | 2,908 | | — | | — | | 2,908 | |||||||
| Revolving Facility | Amortized cost | | 88,350 | | — | | — | | 88,350 | | — | | 88,350 | |||||||
| | | $ | 109,018 | | $ | 122 | | $ | 2,908 | | $ | 88,350 | | $ | 17,638 | | $ | 109,018 |
At December 31, 2022, the carrying values and fair values of our financial instruments by category were as follows:
| | | | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | Fair value | |||||||||||||
| | | | | Carrying | | | | | | | | Short term | | Total | ||||||
| | **** | Classification | value | Level 1 | Level 2 | Level 3 | nature | fair value | ||||||||||||
| Financial assets | | | | | | | ||||||||||||||
| Cash and cash equivalents | FVTPL | | $ | 96,278 | | $ | 96,278 | | $ | — | | $ | — | | $ | — | | $ | 96,278 | |
| Accounts receivable | Amortized cost | | 317 | | 21 | | | — | | — | | 296 | | 317 | ||||||
| Restricted cash | Amortized cost | | 3,432 | | 3,432 | | | — | | — | | — | | 3,432 | ||||||
| | | $ | 100,027 | | $ | 99,731 | | $ | — | | $ | — | | $ | 296 | | $ | 100,027 | ||
| | | | | | | | | | ||||||||||||
| Financial liabilities | | | | | | | | | ||||||||||||
| Trade and other payables | Amortized cost | | $ | 8,851 | | $ | — | | $ | — | | $ | — | | $ | 8,851 | | $ | 8,851 | |
| Accrued liabilities | | Amortized cost | | | 7,967 | | | 352 | | | — | | | — | | | 7,615 | | | 7,967 |
| Lease obligation | Amortized cost | | 3,173 | | — | | | 3,173 | | — | | — | | 3,173 | ||||||
| Credit Facility | | Amortized cost | | 122,995 | | — | | | — | | 124,450 | | — | | 124,450 | |||||
| Fresnillo obligation | | Amortized cost | | | 22,800 | | | — | | | — | | | 22,296 | | | — | | | 22,296 |
| | | $ | 165,786 | | $ | 352 | | $ | 3,173 | | $ | 146,746 | | $ | 16,466 | | $ | 166,737 |
We determine whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.
| (b) | FINANCIAL RISK MANAGEMENT |
|---|---|
| (i) | Credit risk |
| --- | --- |
Credit risk is the risk of an unexpected loss if a customer or third party to financial instruments fails to meet its contractual obligations. The Company’s material exposure to credit risk is limited to its cash.
Our cash is held at large financial institutions in interest bearing accounts. We believe that the credit risk related to our cash is low. The Company’s maximum exposure to credit risk is the carrying value of cash.
| (ii) | Liquidity risk |
|---|
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. Page 29
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
At December 31, 2023, our financial liabilities had expected maturity dates as follows:
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | | | Between | Between | | | | | ||||||
| | | Less than | | 3 months and | | 1 year and | | More than | | | | ||||
| | | 3 months | 1 year | | 3 years | | 3 years | | Total | ||||||
| Financial liabilities | | | | | | ||||||||||
| Trade and other payables | | $ | 8,219 | | $ | — | | $ | — | | $ | — | | $ | 8,219 |
| Accrued liabilities | | 9,541 | | — | | — | | — | | 9,541 | |||||
| Lease obligations | | 276 | | 736 | | 1,210 | | 921 | | 3,143 | |||||
| Revolving Facility | | 1,211 | | 5,974 | | 14,253 | | 93,017 | | 114,455 | |||||
| | | $ | 19,247 | | $ | 6,710 | | $ | 15,463 | | $ | 93,938 | | $ | 135,358 |
At December 31, 2022, our financial liabilities had expected maturity dates as follows:
| | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | Between | | Between | | | | | | | ||
| | | Less than | | 3 months and | | 1 year and | | More than | | | |||||
| | **** | 3 months | 1 year | 3 years | 3 years | Total | |||||||||
| Financial liabilities | | | | | | | | | | | | | | | |
| Trade and other payables | | $ | 8,851 | | $ | — | | $ | — | | $ | — | | $ | 8,851 |
| Accrued liabilities | | | 7,967 | | | — | | | — | | | — | | | 7,967 |
| Lease obligations | | 248 | | 743 | | 1,310 | | 1,226 | | 3,527 | |||||
| Credit Facility | | 7,810 | | 22,868 | | 85,566 | | 29,762 | | 146,006 | |||||
| Fresnillo obligation | | | 285 | | | 23,563 | | | — | | | — | | | 23,848 |
| | | $ | 25,161 | | $ | 47,174 | | $ | 86,876 | | $ | 30,988 | | $ | 190,199 |
We manage liquidity by anticipating and maintaining adequate cash balances to meet liabilities as they become due. We review cash forecasts on a regular basis to determine whether the Company will have sufficient cash to meet future working capital needs.
| (iii) | Market risk |
|---|
Market risk is the risk that the fair value of the Company’s financial instruments will fluctuate due to changes in market prices. The market risks to which the Company’s financial instruments are exposed are commodity price risk, currency risk and interest rate risk.
Commodity price risk
Commodity price risk is the risk of fluctuations in prevailing market commodity prices. Revenues from mining operation, net income, and trade receivables may be affected by changes in commodity prices.
As at December 31, 2023, there were no derivative financial instruments or trade receivables subject to provisional pricing and consequently no exposure to changes resulting from fluctuations in commodity prices.
Had gold prices been 10% greater than actual, our revenues would have increased by $23.4 million (2022— $19.3 million).
Currency risk
The Company is exposed to currency risk to the extent that monetary assets and liabilities held by the Company are not denominated in United States dollars. Page 30
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Our financial instruments are held in Canadian dollars, US dollars, and Mexican pesos. As such, our Canadian- and Mexican-currency denominated accounts and balances are subject to fluctuations against the US dollar. Our financial instruments were denominated in the following currencies as at December 31, 2023:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | Canadian | | | | | |||
| | | dollars | | US dollars | | Mexican pesos | |||
| **** | | (thousands) | | (thousands) | | (thousands) | |||
| Cash | | $ | 27,168 | | $ | 75,645 | | $ | 7,523 |
| Accounts receivable | | 68 | | 25 | | 4,993 | |||
| Restricted funds | | 70 | | 958 | | - | |||
| Trade payables | | (487) | | (5,632) | | (55,827) | |||
| Accrued liabilities | | (3,431) | | (2,636) | | (70,764) | |||
| Lease obligations | | (1,041) | | (486) | | (27,607) | |||
| Revolving Facility | | | — | | | (88,350) | | | — |
| Total foreign currency | | | 22,347 | | | (20,476) | | | (141,682) |
| Exchange rate | | 1.3226 | | 1.0000 | | 16.8935 | |||
| Equivalent US dollars | | $ | 16,896 | | $ | (20,476) | | $ | (8,387) |
Our financial instruments were denominated in the following currencies as at December 31, 2022:
| | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|
| | **** | Canadian | | | | | |||
| | | dollars | | US dollars | | Mexican pesos | |||
| **** | | (thousands) | | (thousands) | | (thousands) | |||
| Cash | | $ | 15,498 | | $ | 84,771 | | $ | 1,250 |
| Accounts receivable | | 28 | | 29 | | 5,475 | |||
| Restricted funds | | 70 | | 3,380 | | — | |||
| Trade payables | | | (337) | | | (6,104) | | | (87,298) |
| Accrued liabilities | | (2,972) | | (4,447) | | (25,679) | |||
| Lease obligations | | (1,323) | | (1,103) | | (21,158) | |||
| Credit Facility | | — | | (122,995) | | — | |||
| Fresnillo obligation | | | — | | | (22,800) | | | — |
| Total foreign currency | | 10,964 | | (69,269) | | (127,410) | |||
| Exchange rate | | 1.3544 | | 1.0000 | | 19.3615 | |||
| Equivalent US dollars | | $ | 8,095 | | $ | (69,269) | | $ | (6,581) |
Based on the above net exposures as at December 31, 2023, and assuming that all other variables remain constant:
| ● | a 10% appreciation of the US dollar against the Canadian dollar would increase profit by $3.8 million (2022 – increase profit by $4.5 million) and |
|---|---|
| ● | a 10% appreciation of the US dollar against the Mexican peso would increase profit by $0.8 million (2022 – increase profit by $0.6 million) |
| --- | --- |
Interest rate risk
Interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our interest rate exposure mainly relates to interest paid on the SOFR-based debt and interest earned on cash and term deposits. The Fresnillo obligation did not fluctuate as it had a fixed interest rate of 5.00%.
A 100 basis points increase in interest rates would result in a decrease of approximately $0.1 million (2022 - decrease income by $0.4 million) to the Company’s income for the year ended December 31, 2023. Page 31
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
24.COMMITMENTS AND CONTINGENCIES
| (a) | COMMITMENTS |
|---|
The Company has issued purchase orders for construction, equipment purchases, materials and supplies, and other services at Camino Rojo. At December 31, 2023, these outstanding purchase orders and contracts totaled approximately $3.7 million (December 31, 2022 – $2.0 million), which we expect will be filled within the next 12 months.
The Company is committed to making severance payments totaling approximately $7.4 million (December 31, 2022 – $3.7 million) to certain officers and management in the event of a change in control. As the likelihood of these events occurring is not determinable, this amount is not reflected in these consolidated financial statements.
| (b) | DISCRETIONARY MINERAL PROPERTY-RELATED COMMITMENTS |
|---|
As is customary in mineral exploration, some of the mineral properties held by the Company as exploration and evaluation assets have annual minimum work commitments and lease payments required to maintain these properties in good standing pursuant to their underlying agreements.
(c)CONTINGENCIES
An ecological tax implemented by the state legislature of Zacatecas could have a significant impact on the economics of the Camino Rojo Project. This tax is applied to cubic metres of material extracted during mining, square metres of material impacted by dangerous substances, tonnes of carbon dioxide produced during mining processes, and tonnes of waste stored in landfills. The Company has received assessments in respect of this tax; however, the Company’s view is that the sections of the law pursuant to which these assessments have been issued do not apply to the Company at this time and, accordingly, we have filed the appropriate appeals. We expect this matter will be resolved by judicial process. As the outcome of these events is not determinable, no amounts have been accrued in respect of this tax.
We may, from time to time, be a party to legal proceedings, which arise in the ordinary course of our business. We are not aware of any pending or threatened litigation that, if resolved against us, would have a material effect on our consolidated financial position, results of operations or cash flows.
25.INCOME TAXES
| (a) | TAX AMOUNTS RECOGNIZED IN PROFIT OR LOSS |
|---|
Tax expense consists of (i) current income tax on taxable income, (ii) 7.5% special mining duty (“SMD”) on income subject to SMD, and (iii) withholding taxes attributable to interest charged on intercompany loans to the Mexican operating company, as well as (iv) deferred income tax, and (v) deferred special mining duty.
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31 | ||||
| **** | **** | 2023 | **** | 2022 | ||
| Current income tax expense | | $ | 22,354 | | $ | 22,512 |
| Mexican 7.5% Special Mining Duty expense | | | 8,068 | | | 9,371 |
| Withholding tax expense | | | 1,601 | | | 3,150 |
| Deferred income tax expense (recovery) | | | 2,517 | | | (2,698) |
| Deferred Mexican 7.5% Special Mining Duty expense | | | 64 | | | 293 |
| Tax expense | | $ | 34,604 | | $ | 32,628 |
Page 32
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (b) | RECONCILIATION OF EFFECTIVE TAX RATE |
|---|
Income tax expense differs from the amount that would be computed by applying the applicable Canadian statutory income tax rate to income before income taxes. The significant reasons for the differences are as follows:
| | | | | | | | |
|---|---|---|---|---|---|---|---|
| | | Year ended December 31 | | ||||
| **** | **** | 2023 | **** | 2022 | **** | ||
| Income (loss) before tax | | $ | 7,594 | | $ | 78,398 | |
| Statutory income tax rate | | 26.8 | % | 26.8 | % | ||
| | | | | | | | |
| Expected income tax | | $ | 2,036 | | $ | 21,036 | |
| Differences between Canadian and foreign tax rates | | 6,442 | | 4,117 | | ||
| Items not deductible for tax purposes | | 76 | | 4,508 | | ||
| Share based compensation | | 674 | | 107 | | ||
| Change in unrecognized deductible temporary differences | | 3,964 | | (10,928) | | ||
| True ups | | | 4,263 | | | 1,901 | |
| Effect of changes in foreign exchange rates | | (7,806) | | (2,371) | | ||
| Inflationary adjustment and other | | (1,175) | | 1,532 | | ||
| Mexican Special Mining Duty | | | 6,422 | | | 9,576 | |
| Withholding tax expense | | | 1,601 | | | 3,150 | |
| Tax impact of impairment of exploration property | | | 18,107 | | | — | |
| Total income taxes | | 34,604 | | 32,628 | | ||
| Effective tax rate | | 456 | % | 42 | % |
The effective tax rate for the current year is unusually high as a result of the accounting impairment of the Cerro Quema Project (note 11(a)).
In 2023, the statutory income tax rate applicable to the Canadian parent entity was 26.8% (2022 – 26.8%).
| (c) | UNRECOGNIZED DEDUCTIBLE TEMPORARY DIFFERENCES |
|---|
We recognize tax benefits on losses or other deductible amounts generated in countries where the probable criteria for the recognition of deferred tax assets has been met. The Company’s unrecognized deductible temporary differences for which no deferred tax asset is recognized consist of the following amounts.
| | | | | | | |
|---|---|---|---|---|---|---|
| **** | | December 31, | | December 31, | ||
| | **** | 2023 | 2022 | |||
| Mineral properties and exploration expenditures | | $ | 95,616 | | $ | 30,467 |
| Equipment | | 1,338 | | 1,251 | ||
| Site closure provisions | | 995 | | 356 | ||
| Long term debt | | | — | | | 6,570 |
| Financing cost | | 2,861 | | 3,452 | ||
| Non-capital losses | | 64,700 | | 53,436 | ||
| Other | | | 717 | | | 154 |
| Unrecognized deductible temporary differences | | $ | 166,227 | | $ | 95,686 |
Page 33
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (d) | RECOGNIZED DEFERRED TAX ASSETS AND LIABILITIES |
|---|
Recognized deferred tax assets and liabilities are comprised of the following:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | December 31, | | December 31, | ||
| | 2023 | 2022 | ||||
| Property, plant and equipment | | $ | (3,722) | | $ | (216) |
| Inventory | | | (3,393) | | | — |
| Accrued liabilities | | | 1,975 | | | — |
| Site closure provisions | | | 1,810 | | | 2,363 |
| Long term debt | | (317) | | — | ||
| Non-capital losses | | 504 | | 1,397 | ||
| Intercompany debt | | | (442) | | | (1,619) |
| Special Mining Duty | | | 2,972 | | | — |
| Other | | 420 | | 480 | ||
| Recognized deferred tax assets (liabilities) | | $ | (193) | | $ | 2,405 |
Significant judgment is required in determining the deferred tax assets related to the Camino Rojo Oxide Mine. This includes the probability that there will be sufficient taxable income in the future against which the deferred tax asset can be utilized. Due to the successful performance of the Camino Rojo Oxide Mine, the Company considers it highly probable that its Mexican operating subsidiary will have future taxable profits which will be available against which the deductible temporary differences can be used.
| (e) | TEMPORARY DIFFERENCE ON INVESTMENT IN SUBSIDIARIES |
|---|
The temporary differences associated with investments in subsidiaries for which a deferred income tax liability has not been recognized, aggregate to $109 million(December 31, 2022 - $32 million). The Company has determined that the taxable temporary difference will not reverse in the foreseeable future.
| (f) | TAX LOSS CARRYFORWARDS |
|---|
Our tax losses have the following expiry dates.
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | Tax losses | | December 31 | ||||
| | **** | expire in years | 2023 | 2022 | ||||
| Canada | 2027 to 2043 | | $ | 62,776 | | $ | 61,214 | |
| Panama | 2024 to 2028 | | 866 | | 736 | |||
| United States | indefinite | | 2,794 | | 27,086 |
26.EVENTS AFTER THE REPORTING PERIOD
(a)POTENTIAL ACQUISITION OF CONTACT GOLD
On February 25, 2024, the Company and Contact Gold Corp. (“Contact”) (a public company listed on the TSX Venture Exchange) entered into an arrangement agreement (the “Arrangement Agreement”) whereby the Company will acquire all of the issued and outstanding common shares of Contact (the “Contact Shares”) pursuant to a court-approved plan of arrangement (the “Transaction”).
Page 34
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Under the terms of the Arrangement Agreement, each holder of Contact Shares will receive, for each Contact Share held, 0.0063 of an Orla common share. The Arrangement Agreement includes certain customary provisions, including non-solicitation provisions and the payment of a break fee payable in certain circumstances, as well as certain representations, covenants and conditions which are customary for a transaction of this nature. The Transaction will be effected by way of a court-approved plan of arrangement under the Business Corporations Act (British Columbia), requiring Contact securityholder approval. In addition to court and securityholder approvals, the Transaction is subject to stock exchange approval and the satisfaction of certain other closing conditions customary in transactions of this nature. The Transaction is expected to close on or about April 29, 2024.
Consequently, we expect to issue approximately 2.2 million common shares of the Company in respect of Contact Shares under the Transaction.
As a result of this transaction, we expect that our total assets and total equity will increase by approximately $8 million and will not have a material effect on the earnings or cashflows of the Company during 2024.
27.MATERIAL ACCOUNTING POLICIES
We have applied the accounting policies set out below consistently to all periods presented in these financial statements.
The significant judgements we made in applying the Company’s accounting policies and the key sources of estimation uncertainty arising in the preparation of these consolidated financial statements are discussed in note 28.
(a)Foreign currencies
| (i) | Foreign currency transactions |
|---|
Transactions in foreign currencies are translated into the respective functional currencies of each entity at the exchange rates in effect on the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate in effect at the date of the transaction. Foreign currency differences are generally recognized in profit or loss.
| (ii) | Translation to presentation currency |
|---|
These consolidated financial statements are presented in United States dollars (“US dollar”, or “USD”).
The presentation currency differs from the functional currency of the parent company and some of its subsidiaries (note 27(a)). We translate the assets and liabilities of entities with functional currencies other than the US dollar into US dollars at the official central bank exchange rates in effect on the reporting date. The results of operations of those entities are translated into US dollars at the average exchange rates in effect during the reporting period. We recognize the foreign currency differences which arise from translation in other comprehensive (loss) income.
When we dispose of an entity in its entirety, or partially such that we have lost control, we reclassify the cumulative amount in the translation reserve related to that operation to profit or loss as part of the gain or loss on disposal.
(iii) Functional currency
The functional currency of each of the Company’s principal operating subsidiaries, all of which are wholly owned, is the United States dollar. The functional currency of the parent company, Orla Mining Ltd., is the Canadian dollar. Page 35
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
The Company’s principal operating subsidiaries are Minera Camino Rojo SA de CV, Minera Cerro Quema SA, Gold Standard Ventures (US) Inc., and Madison Enterprises (Nevada) Inc.
| (b) | Cash and cash equivalents |
|---|
Cash and cash equivalents include cash on hand, demand deposits, and money market instruments, with maturities from the date of acquisition of three months or less, which are readily convertible to known amounts of cash and are subject to insignificant changes in value.
(c)Inventories
Inventories include production inventory, and materials and supplies inventory.
All inventories are valued at the lower of average cost or net realizable market value (“NRV”). NRV is calculated using the estimated price at the time of sale based on prevailing and forecast metal prices less estimated future production costs to convert the inventory into saleable form and associated selling costs. Any write-downs of inventory to its NRV are included in cost of sales in the period. If there is a subsequent increase in the value of inventory, the previous write-downs to NRV are reversed to the extent that the related inventory has not yet been sold.
We classify inventory we do not expect to use within one year as non-current.
(i)Production inventory
Production inventory consists of stockpiled ore, in-process inventory, and finished goods. These are valued at the lower of weighted average cost and estimated NRV.
The value of all production inventories includes direct production costs and attributable overhead and depreciation incurred to bring the materials to their current point in the processing cycle.
Stockpiled ore represents unprocessed ore that has been extracted from the mine but not yet processed. The value of stockpiled ore is based on the costs incurred, including depreciation, in bringing the ore to the stockpiles. Costs are added to the stockpiled ore based on current mining costs per recoverable ounce and are removed at the average cost per recoverable ounce in the stockpile. We classify stockpiled ore that we do not expect to process within the next twelve months as non-current.
In-process inventory represents ore that is being treated on the leach pads and in the processing plant to extract the contained metals and to convert them to a saleable form. Estimates of recoverable metal in the leach pads are calculated based on the quantities of ore placed on the leach pads (measured tonnes added to the leach pads), the grades of ore placed on the leach pads (based on assays), and estimated recovery percentages (based on estimated recovery assumptions). The nature of the leaching process inherently limits the ability to precisely monitor leach pad inventory levels. Accordingly, we refine estimates based on engineering studies or actual results achieved over time. The ultimate recovery of metals from the leach pads will not be known until the leaching process is concluded at the end of the mine life.
The cost of in-process inventory is derived from current mining, crushing, stacking, leaching and plant costs, less the cost of metals transferred to finished goods inventory during the period at the weighted average cost per recoverable ounce.
Finished goods inventory is metal in the form of doré bars that have been poured and are ready to be shipped to a refiner.
Costs are transferred from finished goods inventory and recorded as cost of sales when the refined metal is sold. Page 36
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(ii) Materials and supplies inventory
Materials and supplies inventories consist primarily of parts and consumables required in the mining and ore processing activities. Materials and supplies inventories are measured at the lower of weighted average cost and NRV. Cost includes purchase price, freight, and other directly attributable costs. We record provisions to reduce the carrying value of materials and supplies inventories when we determine such materials and supplies are obsolete or unusable.
(d)Mineral properties and related construction
We capitalize costs directly related to development or construction projects until the asset is available for use in the manner intended by us (“commercial production”), after which we move these costs to “producing mineral properties”.
We assess the stage of a mine under development and construction to determine when the mine is substantially complete and ready for its intended use. The criteria we use to assess when the mine is ready for its intended use are determined based on the unique nature of each mine construction project, such as the complexity of the project and its location. We consider various technical and physical performance criteria to assess when the production phase is considered to have commenced.
When we conclude that a mine under development and construction has commenced commercial production, we reclassify all balance sheet amounts from “Mineral properties and related construction” to balance sheet captions “Producing mineral properties” and “Plant and equipment”.
We do not record depreciation until the mine is substantially complete and available for its intended use.
When a mine development project moves into the production phase, we:
| ● | stop capitalizing certain mine development costs, and we treat such costs as either (i) part of the cost of inventory or (ii) we expense them, |
|---|---|
| ● | stop capitalizing borrowing costs, |
| --- | --- |
| ● | commence depreciation of the producing mineral property, |
| --- | --- |
| ● | continue to capitalize costs relating to mining asset additions or improvements, and costs related to the development of mineable reserves. |
| --- | --- |
(e)Producing mineral properties
Producing mineral properties consist of costs transferred from “Mineral properties under construction” when a mining property reaches commercial production, and acquired mining properties in the production stage.
When a mine construction project moves into the production stage, we cease capitalizing mine construction costs. Upon commencement of commercial production, we charge production costs to metal-in-process inventory, although we capitalize costs related to (1) property, plant and equipment additions or improvements, (2) open pit stripping activities that provide a future benefit, or (3) expenditures that meet the criteria for capitalization in accordance with IAS 16 Property, Plant and Equipment.
Drilling and related costs for an ore body where proven and probable reserves exist and the activities are directed at obtaining additional information on the ore body or converting mineralized material to proven and probable reserves are capitalized. All other drilling and related costs are expensed as incurred.
(i)Stripping costs
In open pit mining operations, it is necessary to incur costs to remove waste material in order to access the ore body, which is known as stripping. Stripping costs incurred prior to the production stage of a mineral property (pre-stripping costs) are capitalized as part of the carrying amount of the related mineral property. Page 37
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
During the production phase of an open pit mine, stripping costs incurred that provide improved access to ore that will be produced in future periods and that would not have otherwise been accessible are capitalized to deferred stripping asset. The costs qualifying for capitalization are those costs directly incurred to perform the stripping activity that provides or improves access to the identified component of ore, plus an allocation of directly attributable overhead costs, which are determined using a strip ratio methodology. The strip ratio represents the ratio of the estimated total volume of waste material to the estimated total quantity of economically recoverable ore of the mineral reserves for which access has been provided or improved. The deferred stripping asset is capitalized as part of the carrying amount of the mineral property. Capitalized stripping costs are amortized based on the estimated recoverable ounces contained in mineral reserves that directly benefit from the stripping activities. Costs for waste removal that do not give rise to future economic benefits are included in cost of sales.
(ii)Depletion and depreciation
Depletion commences once the mineral property is capable of operating in the manner intended by management. Producing mineral properties are depleted on a units-of-production basis over the estimated useful life of the mine. This depletion is calculated using the ratio of (i) gold ounces produced from the mine in the period, over (ii) the total gold ounces expected to be produced in current and future periods.
Major capital works projects conducted after the mine commences commercial production are not depreciated until such works are completed and put into use in a manner intended by management.
We review depreciation methods, remaining useful lives and residual values at least annually and we account for changes in estimates prospectively.
(iii)Impairment
At the end of each reporting period, we review our mineral properties, and related plant and equipment to determine whether there is any indication that these assets are impaired. If any such indication exists, we estimate the recoverable amount. If the asset’s carrying amount exceeds its recoverable amount, we recognize an impairment loss in profit or loss.
We assess impairment at the cash-generating unit (“CGU”) level, which is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets. Each individual mining interest that is an operating mine is typically a CGU.
The recoverable amount of a mine is the greater of an asset’s fair value less costs to dispose (“FVLCD”) and value in use (“VIU”). FVLCD is defined as the amount that would be obtained from the sale of the asset in an orderly transaction between market participants at the measurement date. VIU is determined as the present value of the estimated future cash flows expected to arise from the continued use of the asset in its present form and from its ultimate disposal.
Mineral properties, and plant and equipment that have been impaired are tested for possible reversal of the impairment when events or changes in circumstances indicate that the recoverable amount of the associated CGU has increased. When an impairment loss reverses in a subsequent period, the revised carrying amount shall not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset previously, less subsequent depletion and depreciation. Reversals of impairment losses are recognized in profit or loss in the period in which the reversal occurs.
| (f) | Exploration and evaluation (“E&E”) expenditures |
|---|
Exploration and evaluation expenditures include the search for mineral resources, and the determination of technical feasibility, and assessment of the commercial viability of, an identified mineral resource. Activities include acquisition of rights to explore; topographical, geological, geochemical and geophysical studies; exploratory drilling; trenching; sampling; and evaluation of the technical feasibility and commercial viability of extracting a mineral resource.
We capitalize as exploration and evaluation assets the acquisition costs of exploration properties (whether acquired in a business combination or through an acquisition of assets). Page 38
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
We expense all other E&E expenditures, including non-refundable advance royalty payments.
Exploration and evaluation properties are subsequently measured at cost less accumulated impairment.
When the technical feasibility and economic viability of a project are demonstrable, funding is in place, and a positive development decision is made, we test the mineral property for impairment and transfer the costs to “Mineral properties and related construction”. We capitalize subsequent expenditures on the project.
We assess exploration and evaluation properties for impairment when indicators and circumstances suggest that the carrying amount may exceed its recoverable amount. Typical indicators of impairment include:
| ● | the period for which we have the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed; |
|---|---|
| ● | substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; |
| --- | --- |
| ● | exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and we have decided to discontinue such activities in the specific area; |
| --- | --- |
| ● | sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full via successful development or by sale. |
| --- | --- |
If any such indication exists, we estimate the recoverable amount of the asset to determine the extent of the impairment. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the cash generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, we discount the estimated future cash flows to their present value using a pre‐tax discount rate that reflects current market assessments of the time value of money and the risks specific to the E&E asset. If we estimate the recoverable amount of an asset to be less than its carrying amount, we recognize an impairment loss in profit or loss for the period.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash generating unit) in prior years. We recognize reversals of impairment immediately in profit or loss.
| (g) | Property, plant and equipment |
|---|
Equipment is initially recognized at cost. Cost includes purchase price, directly attributable costs, and the estimated present value of any future costs of decommissioning and removal. Equipment is carried at cost, net of accumulated depreciation and impairments. We depreciate equipment to their residual values over their estimated useful lives, as follows:
| | | |
|---|---|---|
| Mine equipment | | Units-of-production over mineral reserves |
| Plant equipment and related buildings | | Units-of-production over mineral reserves |
| Other equipment | Straight line over useful life | |
| Office equipment | | Straight line over useful life |
| Vehicles | Straight line over useful life, typically 4 years | |
| Hardware and software | Straight line over useful life, typically 3 years |
Page 39
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (h) | Leases |
|---|
At the inception of a contract, we assess whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, we consider whether:
| ● | the contract involves the use of an identified asset, either explicitly or implicitly, including consideration of supplier substitution rights; |
|---|---|
| ● | we have the right to obtain substantially all the economic benefits from the use of the asset throughout the period of use; and |
| --- | --- |
| ● | we have the right to direct the use of the asset. |
| --- | --- |
We recognize a right-of-use (“ROU”) asset, which is initially measured based on the initial amount of the lease liability plus any initial direct costs incurred less any lease incentives received. We depreciate the ROU asset to the earlier of the end of the useful life or the lease term using either the straight-line or units-of-production method, depending on which method more accurately reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if we determine the Company is reasonably likely to exercise the option.
We initially measure the lease liability at the present value of the lease payments that are not yet paid as of the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. We then measure the lease liability at amortized cost using the effective interest method and remeasure it when there is a change in future lease payments.
We apply the short-term lease (defined as leases with an initial lease term of 12 months or less) and low-value asset recognition exemptions. For these leases, we recognize the lease payments an expense over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
| (i) | Asset retirement and site closure obligations |
|---|
We record an asset retirement and site closure obligation when a legal or constructive obligation exists as a result of past events and we can make a reliable estimate of the undiscounted future cash flows required to satisfy the asset retirement and site closure obligation. Such costs include decommissioning or dismantling plant and equipment, and reclamation, closure, and post-closure monitoring of the property.
The estimated future cash flows are discounted to a net present value using an applicable risk-free interest rate. We accrete the provision for asset retirement and site closure obligations over time to reflect the unwinding of the discount and charge the accretion expense to profit or loss for the period.
We remeasure the asset retirement and site closure obligation at the end of each reporting period for changes in estimates or circumstances, such as changes in legal or regulatory requirements, increased obligations arising from additional disturbance due to mining and exploration activities, changes to cost estimates, and changes to risk-free interest rates.
Asset retirement and site closure obligations related to exploration and evaluation activities are expensed. Asset retirement and site closure obligations relating to “mineral properties and related construction”, and to exploration and evaluation properties, are initially capitalized with a charge to the related mineral property. Changes to the obligation which arise as a result of changes in estimates and assumptions are also accounted for as changes in the carrying amounts of related mining property.
(j)Revenue
The Company’s primary source of revenue is the sale of refined gold and silver. The Company’s performance obligations relate primarily to the delivery of refined gold and silver to its customers. Page 40
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Revenue related to the sale of metal is recognized when the customer obtains control of the metal. In determining whether the Company has satisfied a performance obligation, we consider whether (i) the Company has a present right to payment, (ii) the Company has transferred physical possession of the metal to the customer; (iii) the customer has the significant risks and rewards of ownership of the metal; and (iv) the customer has legal title to the metal.
We sell refined gold and silver primarily to refiners, bullion banks or members of the London Bullion Market Association (“LBMA”). The sales price is fixed on the date of sale based on spot price or by mutual agreement. We recognize revenue from sales of gold and silver at the time when risk and rewards of ownership and title transfers to the customer, which typically coincides with the date that the customer remits payment. Under certain contracts with customers the transfer of control may occur when the gold or silver is in transit from the mine to the refinery. At this point in time, the customer has legal title to and the risk and rewards of ownership of the gold or silver; therefore, the customer is able to direct the use of and obtain substantially all of the remaining benefits from the gold or silver.
Revenue from refined sales is recognized net of treatment and refining charges.
(k)Deferred revenue
The Company recognizes deferred revenue in the event it receives payments from customers in consideration for future commitments to deliver metals and before such sale meets the criteria for revenue recognition. The Company will recognize amounts in revenue as the metals are delivered to the customer. Specifically, for the silver stream agreement arising from the acquisition of Gold Standard Ventures Corp., we will amortize deferred revenue to revenue using ounces of silver sold over the estimated total ounces of silver expected to be delivered over the life of mine.
| (l) | Share based payments |
|---|---|
| (i) | Stock options, restricted share units (“RSUs”), performance share units (“PSUs”), and deferred share units (“DSUs”) |
| --- | --- |
The Company grants stock options, and awards RSUs, PSUs and DSUs to employees, officers and directors from time to time. At the date of grant or award, we estimate the fair values of the stock options, RSUs, PSUs and DSUs which will eventually vest. These estimated fair values are recognized as share-based compensation expense over the specific vesting periods, with a corresponding increase to reserves, a component of equity.
We determine the fair value of stock options using a Black-Scholes option pricing model with market-related inputs as of the date of grant. The fair value of RSUs and DSUs is the market value of the underlying shares as of the date of award. The fair value of PSUs is determined using a Monte Carlo valuation model at the date of grant. Cash-settled RSUs are remeasured using the market value of the underlying shares at the end of each reporting period. Stock option grants and RSU awards with several tranches of vesting are accounted for as separate awards with different vesting periods and fair values. We account for changes to the estimated number of awards that will eventually vest prospectively.
| (ii) | Bonus shares |
|---|
The Company has issued bonus shares, which have vested upon the completion of a specified period of service. The fair value of the bonus shares is determined on the date of award; this fair value has been recognized in share-based compensation expense over the service period.
| (m) | Income taxes |
|---|
Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or OCI.
| (i) | Current tax |
|---|
Page 41
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Current tax expense comprises the expected tax payable on taxable income for the year and any adjustment to income tax payable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any withholding tax arising from interest and dividends.
| (ii) | Deferred tax |
|---|
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for:
| ● | temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination, and at the time of the transaction, affects neither the accounting profit nor taxable profit (tax loss); |
|---|---|
| ● | temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that we are able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and |
| --- | --- |
| ● | taxable temporary differences arising on the initial recognition of goodwill. |
| --- | --- |
We recognize deferred tax assets for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. If the amount of taxable temporary differences is insufficient to recognize a deferred tax asset in full, then future taxable profits are considered based on the business plans for the individual taxable entity. We review deferred tax assets at each reporting date and reduce them when we consider it no longer probable that the related tax benefit will be realized. Unrecognized deferred tax assets are reassessed at each reporting date and recognized to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to apply to the temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset only when there are sufficient taxable temporary differences relating to the same taxation authority and the same taxable entity which are expected to reverse in the same period or in the carried back/forward period as the expected reversal of the deductible temporary difference.
Amendment to IAS 12, Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction.
We applied this amendment for the first time in 2023. This amendment narrows the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences, such as leases and decommissioning liabilities. There was no impact on the Company’s consolidated financial statements.
| (n) | Earnings (loss) per share |
|---|
Basic earnings (loss) per share is based on profit (loss) attributable to common shareholders, divided by the weighted average number of common shares outstanding during the reporting period.
Diluted earnings (loss) per share is based on profit (loss) attributable to common shareholders, divided by the weighted average number of common shares outstanding during the reporting period after adjusting for the effects of all dilutive potential ordinary shares.
(o)Business combinations
We account for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and when control is transferred to the Company. In determining whether a particular set of activities Page 42
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
and assets is a business, we assess whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. We expense transaction costs as incurred, except if they are related to the issuance of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.
Any contingent consideration is measured at estimated fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognized in profit or loss.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards), then all or a portion of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based measure of the replacement awards compared with the market-based measure of the acquiree’s awards and the portion to which the replacement awards relate to pre-combination service.
The results of businesses acquired during a reporting period are included in the consolidated financial statements starting from the date of acquisition.
(p)Financial instruments
| (i) | Financial assets |
|---|
We initially recognize financial assets when the Company becomes party to the contractual provisions of the instrument. Subsequent to initial recognition, we classify financial assets as measured at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”) after considering both our business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.
A financial asset is measured at amortized cost if both of the following conditions are met:
| ● | the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and |
|---|---|
| ● | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
| --- | --- |
A financial asset is measured at FVOCI if both of the following conditions are met:
| ● | the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and |
|---|---|
| ● | the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. |
| --- | --- |
We may make an irrevocable election at initial recognition to carry at FVOCI particular investments in equity instruments that would otherwise be measured at FVTPL.
A financial asset is required to be measured at FVTPL unless it is measured at amortized cost or at FVOCI. Page 43
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
If we change our business model for managing financial assets, we reclassify all affected financial assets on a prospective basis, without restating any previously recognized gains, losses or interest.
If the asset is reclassified to fair value, we determine the fair value at the reclassification date, and recognize in profit or loss any gain or loss arising from a difference between the previous carrying amount and fair value.
An embedded derivative is a component of a hybrid contract that also includes a non-derivative host, with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. A derivative that is attached to a financial instrument but is contractually transferable independently of that instrument, or has a different counterparty, is not an embedded derivative, and is treated as a separate financial instrument.
Upon initial recognition, we measure a financial asset at its fair value. However, we measure trade receivables that do not have a significant financing component at their transaction price. After initial recognition, we measure financial assets at amortized cost, FVOCI, or FVTPL.
Changes in fair value of a financial asset that is carried at FVTPL are recognized in profit or loss, and changes in fair value of a financial asset that is carried at FVOCI are recognized in other comprehensive income, unless it is part of a hedging relationship.
Gains or losses on a financial asset that is carried at FVTPL are recognized in profit or loss, and gains or losses on a financial asset that is carried at FVOCI are recognized in other comprehensive income, unless it is part of a hedging relationship. A gain or loss on a financial asset that is measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized, impaired, amortized, or reclassified.
(ii)Financial liabilities
We initially recognize financial liabilities when the Company becomes party to the contractual provisions of the instrument. At initial recognition, we measure each financial liability at its fair value. In the case of a financial liability not at FVTPL, we deduct transaction costs that are directly attributable to the issuance of the financial liability.
Subsequent to initial recognition, we classify and measure all financial liabilities at amortized cost using the effective interest method, except for financial liabilities at FVTPL.
We may, at initial recognition, irrevocably designate a financial liability as measured at FVTPL.
(iii)Impairment
We recognize a loss allowance for expected credit losses on financial assets, based on lifetime expected credit losses.
For the Company’s trade receivables, we determine the lifetime expected losses for all of our trade receivables. The expected lifetime credit loss provision for the Company’s trade receivables is based on historical counterparty default rates and we adjust for relevant forward-looking information if necessary.
(q)FORTHCOMING REQUIREMENTS
Non-current Liabilities with Covenants – Amendments to IAS 1, and
Classification of Liabilities as Current or Non-current – Amendments to IAS 1
Under these amendments to IAS 1 «Presentation of Financial Statements» the classification of certain liabilities as current or non-current may change. Reporting entities may need to provide new disclosures for liabilities subject to covenants.
The amendments will apply from January 1, 2024.
We are currently assessing the impact of these amendments. Page 44
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Lease Liability in a Sale and Leaseback
Amendments to IFRS 16
These amendments to IFRS 16 «Leases» impact how a seller-lessee accounts for variable lease payments that arise in a sale-and-leaseback transaction. The amendments introduce a new accounting model for variable payments and will require seller-lessees to reassess and potentially restate sale-and-leaseback transactions entered into since 2019.
The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted.
We do not expect these amendments to have any material impact on our current or previously reported financial statements because we have not had transactions to which these amendments apply.
Supplier Finance Arrangements
Amendments to IAS 7 and IFRS 7
These amendments introduce additional disclosure requirements for reporting entities that enter into supplier finance arrangements.
The amendments are effective for periods beginning on or after January 1, 2024, with early application permitted. We do not expect these amendments to have any material impact on our current or previously reported financial statements because we have not had transactions to which these amendments apply.
Lack of Exchangeability
Amendments to IAS 21
These amendments clarify (a) when a currency is exchangeable into another currency; and (b) how a company estimates a spot rate when a currency lacks exchangeability.
The amendments are applicable for annual reporting periods beginning on or after January 1, 2025. We do not expect these amendments to have any material impact on our current or previously reported financial statements because we do not have and do not expect to have any currency transactions to which these amendments apply.
Page 45
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| 28. | SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES |
|---|---|
| (a) | SIGNIFICANT JUDGEMENTS |
| --- | --- |
In preparing the consolidated financial statements, we make judgments when applying our accounting policies. The judgments that have the most significant effect on the amounts recognized in the consolidated financial statements are outlined below.
| (i) | Assessment of impairment indicators |
|---|
We apply judgement in assessing whether indicators of impairment exist for our exploration and evaluation (“E&E”) properties and for our mineral properties which could result in a test for impairment.
For our E&E properties, we consider internal and external factors, such as our rights to explore, planned expenditures on E&E activities, the changes in mineral resources and mineral reserves, the potential for viable operations, significant decline in the market value of the Company, changes in metal prices and costs and changes in interest rates to determine whether there are any indicators of impairment or reversal of a previous impairment.
For our mineral properties, we consider external factors such as changes in technology, the market, the economy, or the legal environment, interest rates, and the market capitalization of the Company compared to the book value of the asset. We also consider internal factors such as economic performance of the asset, idle properties and plans to discontinue operations, useful life of the property, our ability to repatriate or use profits from the property, restrictions on access, environmental restrictions, and political instability.
Although the Company has taken steps to verify title to exploration and evaluation properties in which it has an interest, these procedures do not guarantee the Company’s title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. Further, we make judgements for properties where concessions terms have expired, and a renewal application has been made and is awaiting approval. We use judgement as to whether the concession renewal application is probable to be received, but ultimately this is beyond our control. If a renewal application is not approved, we could lose rights to those concessions.
We consider other factors such as typical practice in foreign jurisdictions related permit renewals, our continued ability to operate as usual while awaiting renewals, our continued performance under regulatory requirements, and the ongoing acceptance by authorities of our annual fees.
| (ii) | Recovery of deferred tax assets |
|---|
At each reporting period, we assess whether it is probable that the Company is able to benefit from tax loss carryforwards and other temporary differences.
We consider the recoverability of deferred tax assets based on future taxable income to determine the deferred tax asset to be recognized. Significant assumptions used to determine future taxable income include estimates for commodity prices, reserves and resources, operating costs, financing costs, development capital, and scheduling and mine design. Revisions to these estimates could result in material adjustments to the financial statements.
The determination of the ability of the Company to utilize tax losses carried forward to offset income taxes payable in the future and to utilize temporary differences which will reverse in the future requires management to exercise judgement and make assumptions about the Company’s future performance. Page 46
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (b) | SIGNIFICANT ESTIMATES |
|---|
The preparation of financial statements in conformity with IFRS requires the use of estimates that affect the amounts reported and disclosed. These estimates are based on our knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results may differ materially from the amounts included in the consolidated financial statements. Information about assumptions and other sources of estimation uncertainty as at December 31, 2023 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next 12 months are outlined below.
| (i) | Mineral resource and mineral reserve estimates |
|---|
Mineral resource and mineral resource estimates are estimates of the amount of ore that can be economically extracted from the Company’s mining properties. Such estimates impact the financial statements in the following ways:
Mineral resource and mineral reserve estimates are key factors considered in determining whether technical feasibility and commercial viability of extracting a mineral resource are demonstrable which influences the classification of expenditure,
The carrying value of assets may be affected due to changes in estimated mineral reserves and resources if the change is considered an indicator of impairment,
Depreciation of producing mineral properties is affected by changes in reserve estimates,
Site closure provisions may change where reserve estimate changes affect expectations about when such activities will occur and the associated cost of these activities.
The mineral resource and mineral reserve estimates are based on information compiled by qualified persons within the meaning of Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Such information includes geological and technical data on the size, depth, shape and grade of the ore body and suitable production techniques and recovery rates. Such an analysis requires complex geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements and production costs, along with geological assumptions and judgements made in estimating the size and grade of the ore body
As the economic assumptions used may change and as additional geological information is produced during the operation of a mine, estimates of mineral resources and mineral reserves may change.
| (ii) | Valuation of production inventory |
|---|
The measurement of inventory, including the determination of its NRV, especially as it relates to metal production inventory involves the use of estimates.
NRV is calculated as the estimated price at the time of sale based on prevailing metal prices, less estimated future production costs to convert the inventory into saleable form and associated selling costs, discounted where applicable. In determining the value of metal on the leach pads, we make estimates of rock densities, tonnages, grades, and the recoverability of ore stacked on leach pads to estimate its value. Changes in these estimates can result in a change in carrying amounts of inventory, which could result in charges to cost of sales. The determination of forecast sales prices, recovery rates, grade, assumed contained metal in stockpiles, work-in-process and leach pad inventory and production and selling costs all requires significant assumptions that impact the carrying value of production inventories. Page 47
ORLA MINING LTD.
Notes to the Consolidated Financial Statements
Years ended December 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
| (iii) | Recoverable amount of exploration and evaluation assets |
|---|
Determining whether the recoverable amount of an exploration and evaluation asset is based on its fair value less costs of disposal or its value in use involves judgment. This includes assessing whether market transactions for similar assets are available and whether these transactions can be considered as basis for fair value, or whether the value in use calculation, which involves estimating future cash flows, is more appropriate. Included with this are judgements about external factors, including changes in the legal, environmental, and political context in which the mine or potential mine operates.
In valuing land, estimates include per-hectare valuation rates based on permitted use, market conditions, topography, and other factors.
| (iv) | Asset retirement and site closure obligations |
|---|
We make estimates and assumptions in determining the provisions for asset retirement and site closure. The estimates and assumptions include determining the amount and timing of future cash flows, inflation rates, and discount rates. The ultimate rehabilitation costs are uncertain, and cost estimates can vary in response to many factors, including judgements of the extent of rehabilitation activities, technological changes, and regulatory changes. Consequently, there could be significant adjustments to the provisions established, which would affect future financial position, results of operations, and changes in financial position. The provision is management’s best estimate of the present value of the future asset retirement and site closure obligation. Actual future expenditures may differ from the amounts currently provided.
| (v) | Fair value measurement |
|---|
Management uses valuation techniques in measuring the fair value of share options granted and restricted share units, deferred share units, and bonus shares awarded. Such valuation techniques are also used for estimating the fair value upon initial recognition of the purchase price allocated to the assets and liabilities of South Railroad and Lewis.
We determine the fair value of share-based payments awarded using the Black Scholes option pricing model which requires us to make certain estimates, judgements, and assumptions in relation to the expected life of the share options, expected volatility, expected risk‐free rate, and expected forfeiture rate. Changes to these assumptions could have a material impact on the Company’s financial statements.
Page 48
Exhibit 99.4
CERTIFICATION
I, Jason Simpson, certify that:
| 1. | I have reviewed this annual report on Form 40-F of Orla Mining Ltd.; |
|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|---|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
|---|
| 4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
|---|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|---|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|---|
| (c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|---|
| (d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
|---|
| 5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
|---|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
|---|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
|---|
| | | |
|---|---|---|
| Date: March 19, 2024 | /s/ Jason Simpson | |
| | Jason Simpson | |
| | President and Chief Executive Officer |
CERTIFICATION
I, Etienne Morin, certify that:
| 1. | I have reviewed this annual report on Form 40-F of Orla Mining Ltd.; |
|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|---|
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
|---|
| 4. | The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
|---|
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|---|
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|---|
| (c) | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|---|
| (d) | Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
|---|
| 5. | The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
|---|
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
|---|
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting. |
|---|
| Date: March 19, 2024 | /s/ Etienne Morin | |
|---|---|---|
| | Etienne Morin | |
| | Chief Financial Officer |
Exhibit 99.5
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Orla Mining Ltd. (the “Company”) on Form 40-F for the period ended December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jason Simpson, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| | | |
|---|---|---|
| Date: March 19, 2024 | /s/ Jason Simpson | |
| | | Jason Simpson |
| | | President and Chief Executive Officer |
A signed original of this written statement required by Section 906 has been provided to Orla Mining Ltd. and will be retained by Orla Mining Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the annual report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of §18 of the Securities Exchange Act of 1934, as amended.
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the annual report of Orla Mining Ltd. (the “Company”) on Form 40-F for the period ended December 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Etienne Morin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| | | |
|---|---|---|
| Date: March 19, 2024 | /s/ Etienne Morin | |
| | Etienne Morin | |
| | Chief Financial Officer |
A signed original of this written statement required by Section 906 has been provided to Orla Mining Ltd. and will be retained by Orla Mining Ltd. and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the annual report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Registrant for purposes of §18 of the Securities Exchange Act of 1934, as amended.
Exhibit 99.6
ORLA MINING LTD.
CODE OF BUSINESS CONDUCT AND ETHICS
INTRODUCTION
This Code of Business Conduct and Ethics (the “Code”) applies to all employees, officers and members of the Board of Directors (the “Board”) of Orla Mining Ltd. (the “Company” or “Orla”) as well as consultants and contractors to the Company (each a “Representative”). The Code covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all Representatives. Consultants and contractors retained by the Company are expected to conduct themselves in accordance with these principles in their activities relating to the Company. It is the responsibility of the employee, director or officer retaining a consultant or contractor to ensure that they are aware of the contents of this Code and that the consultant or contractor agrees to abide by its provisions in its dealings with and on behalf of the Company.
The Company requires high standards of professional and ethical conduct from all Representatives. Our reputation for honesty, integrity and accountability is important for the success of our business.
Representatives will be held accountable for their adherence to the Code. Failure to observe the terms of the Code may result in disciplinary action, up to and including termination of employment, engagement or removal from the Board of Directors. Violations of the Code may also constitute violations of law and may result in civil or criminal penalties.
REPRESENTATIVES WHO ARE IN A SITUATION THAT THEY BELIEVE MAY VIOLATE OR LEAD TO A VIOLATION OF THIS CODE ARE ENCOURAGED TO TALK TO SUPERVISORS, MANAGERS OR OTHER APPROPRIATE PERSONNEL ABOUT THE BEST COURSE OF ACTION TO TAKE IN A PARTICULAR SITUATION.
| 1. | COMPLIANCE AND REPORTING |
|---|
Compliance with all applicable laws and regulations is essential to the conduct of the Company’s business and is the foundation on which the Company’s ethical standards are built. Representatives have a responsibility to meet and exceed the standards contemplated in the laws and regulations of each country in which the Company operates. Orla expects Representatives to take all reasonable action to prevent a violation of this Code, to identify and immediately raise potential ethical issues facing Orla and to seek guidance when necessary.
If a Representative has any questions regarding the best course of action to take in a particular situation or suspects a possible violation of a law, regulation or of this Code, then such person should promptly contact the Chief Financial Officer who, depending on the issue raised will convey any concern to the Chair of the Audit Committee or to the Chief Executive Officer as the case may require. Every reasonable effort will be made to ensure the confidentiality of those furnishing information. Concerns which regard the Chief Financial Officer should be addressed to the Chair of the Audit Committee. If an employee, officer or director prefers to report an allegation or ethical issue anonymously, he or she must provide enough information about the incident or situation to allow the Chief Financial Officer or the Chair of the Audit Committee, as the case may be, to investigate properly.
Orla encourages Representatives to raise possible ethical issues and will not tolerate retaliatory action against any individual for raising legitimate concerns or questions regarding ethics matters or for reporting suspected violations in good faith.
| 2. | CONFLICTS OF INTEREST |
|---|
All Representatives have an obligation to act in the best interests of Orla.
A “conflict of interest” occurs when an individual’s private interest improperly interferes, or appears to interfere, with the interests of Orla. A conflict situation can arise when an individual (i) has personal interests that conflict, or appear to conflict, in any way, with the interests of the Company; (ii) takes action for his or her direct or indirect benefit or the direct or indirect benefit of a third party that is in conflict with the interests of the Company; (iii) receives, directly or indirectly, improper personal benefits as a result of his or her position in the Company; or (iv) takes actions or has private interests that may make it difficult to perform his or her work objectively and effectively.
Any activity that could give rise to conflicts of interest is prohibited unless specifically approved in advance. Where a conflict involves a Board member (e.g. where a Board member has an interest in a material contract or material transaction involving the Company), the Board member involved will be required to disclose his or her interest to the Board and refrain from voting on the matter giving rise to the conflict, in accordance with applicable law. Where a conflict involves a senior officer, approval of the Board will be required. Where a conflict involves an employee or a consultant, approval of a member of senior management will be required.
It is not always easy to determine whether a conflict of interest exists. In the event that any potential conflict of interest arises, and the individual involved is an employee of the Company, the individual involved must immediately notify his or her direct supervisor who may contact a senior officer of the Company, if appropriate. If the individual is an officer or director of the Company, he or she must immediately notify a senior officer or director of the Company who will assess the issue with, if necessary, the advice of legal counsel.
| 3. | CORPORATE OPPORTUNITIES |
|---|
Representatives are prohibited from taking for themselves personally opportunities that arise as a result of their position with the Company except where the Board, after receiving the necessary information concerning such opportunity and receiving advice of legal counsel, has elected not to avail itself of the opportunity in compliance with applicable corporate law.
If a Representative has any doubt as to whether any activity they are contemplating violates this requirement, he or she must refer the issue to a member of senior management who will assess the issue with, if necessary, the advice of legal counsel.
| 4. | FAIR DEALING / COMPETITIVE PRACTICES |
|---|
Representatives should endeavour to deal fairly with Orla’s counterparties, suppliers, competitors and their employees. No Representative may take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.
The Company firmly believes that fair competition is fundamental to the continuation of the free enterprise system. The Company complies with and supports laws that prohibit restraint of trade, unfair practices or abuse of economic power. Accordingly, the Company will not enter into arrangements that unlawfully
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restrict its ability to compete with other businesses, or the ability of any other business organization to compete freely with the Company. The Company’s policy also prohibits it from entering into or discussing any unlawful arrangement or understanding that may result in unfair business practices or anticompetitive behaviour.
| 5. | DOMESTIC AND FOREIGN OFFICIALS |
|---|
The Company specifically prohibits bribery of public officials and third parties and requires compliance with all anti-corruption and other applicable laws in the countries where the Company does business, including, but not limited to, the Corruption of Foreign Public Officials Act (Canada) and the Foreign Corrupt Practices Act (United States) (together, the “Acts”).
Such laws make it illegal for any person, in order to obtain or retain an advantage in the course of business, directly or indirectly, to offer or agree to give or offer a loan, reward, advantage or benefit of any kind to a domestic or foreign public official or to any person for the benefit of a public official. Foreign public officials include persons holding a legislative, administrative or judicial position of a foreign state, persons who perform public duties or functions for a foreign state (such as persons employed by board, commissions or government corporations), officials and agents of international organizations, foreign political parties and candidates for office.
Although “facilitated payments” or certain other transactions may be exempted or not illegal under applicable law, the Company’s policy is to avoid them. Even the appearance of impropriety in dealing with public officials is improper and unacceptable. Representatives who have questions about the application of this policy to a particular situation, should contact a senior officer of the Company who, with the advice of counsel as necessary, will determine acceptability from both a legal and a corporate policy point of view.
A violation of anti-corruption laws, including the Acts, is a criminal offence, subjecting the Company to substantial fines and penalties and any Representative acting on behalf of the Company to imprisonment and fines. Violation of this policy may result in disciplinary actions up to and including discharge from the Company. Please refer to the Company’s Anti-Corruption and Anti-Bribery Policy for further details.
| 6. | GIFTS & ENTERTAINMENT |
|---|
Representatives should not use their position with the Company for personal gain or to obtain a personal benefit from other employees or from those doing or seeking to do business with the Company. Actions taken and decisions made must be on an impartial and objective assessment of the facts in each situation, free from the influence of gifts, which may adversely affect one’s judgment.
Customers, suppliers, contractors, consultants and others doing or seeking to do business with the Company must be selected and dealt with in an impartial manner, without favour or preference based upon any considerations other than the best interests of the Company. Therefore, Representatives cannot accept or provide, directly or indirectly, for personal benefit, payments, services, loans, other compensation or benefits from or to a customer, supplier, contractor, consultant, or other individual or entity that does or seeks to do business with, or is a competitor of, the Company if it could reasonably be considered to be extravagant and/or improperly influencing the Company’s business relationship with, or creating an obligation to, the recipient.
This prohibition does not prevent Representatives from accepting or providing modest gifts or entertainment that are customarily provided to foster important business relationships and which do not (and could not reasonably be perceived to) influence business decisions or compromise our independent judgment. The following are guidelines regarding gifts and entertainment:
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| (a) | Modest gifts, such as logo items, pens, calendars, caps, shirts and mugs are acceptable; |
|---|---|
| (b) | Reasonable invitations to business-related meetings, conventions, conferences or product training seminars may be accepted; |
| --- | --- |
| (c) | Invitations to social, cultural or sporting events may be accepted if the cost is reasonable and attendance serves a customary business purpose such as networking (e.g. meals, holiday parties and tickets); and |
| --- | --- |
| (d) | Invitations to golfing, fishing, sports events or similar trips that are usual and customary for the Representative’s position within the Company and the industry and promote good working relationships with customers and suppliers may be accepted. |
| --- | --- |
| 7. | INSIDER TRADING |
| --- | --- |
Representatives should be aware that there are statutory prohibitions against and penalties for buying or selling shares when the Representative is aware of material information about Orla that has not yet been made public. Information that could reasonably be expected to affect the market price or value of Orla’s shares is considered to be “material information.”
Securities laws ban using material information that has not been disclosed to the public when buying or selling shares (“insider trading”) and passing on this information to others for their use when buying or selling shares (“tipping”). For example, giving confidential information to a relative or friend, who then buys or sells shares of Orla based on that information, is illegal on the part of both parties.
Representatives are required to, among other things, (i) always maintain the confidentiality of all material undisclosed information about the Company; (ii) never trade in securities of the Company when aware of material undisclosed information about the Company; and (iii) always comply with the rules and procedures set out in this Code and all securities laws and regulations.
Insider trading and tipping are serious violations of the law and can result in severe penalties and criminal charges, including imprisonment. Please refer to Orla’s Insider Trading Policy for further details.
| 8. | CONFIDENTIAL INFORMATION |
|---|
Representatives should keep all confidential information in strict confidence, except when disclosure is expressly authorized by the Company or legally mandated. Confidential information includes, among other things, all non-public information that may be of use to competitors, or harmful to the Company, if disclosed. It also includes information that suppliers and partners have entrusted to the Company and its Representatives.
Inquiries from the press, media, investors, or the public regarding Orla should only be answered by the officers or employees designated to respond to such inquiries under the Company’s Corporate Disclosure Policy.
A Representative’s obligation to safeguard Orla’s confidential information continues after his or her employment with the Company ends.
See the Company’s Corporate Disclosure Policy for further details.
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| 9. | HARASSMENT OR DISCRIMINATION |
|---|
The Company is committed to fostering a work environment of mutual respect and tolerance for diversity and will not tolerate and is dedicated to preventing bullying and harassment of any kind.
Examples of conduct or comments that might constitute bullying or harassment include verbal aggression or insults, unwanted physical contact, sexual advances with or without actual or implied work-related consequences, sexual jokes or innuendos, calling someone derogatory names, harmful hazing or initiation practices, vandalizing personal belongings and spreading malicious rumours.
The Company also supports the principle that every individual must be accorded an equal opportunity in all aspects of employment. The Company is committed to maintaining a work environment free from discriminatory practices of any kind. The Company expressly prohibits discrimination against any employee or applicant because of race, religion, color, sex, sexual orientation, age, national or ethnic origin, or physical disability (unless demands of the position are prohibitive).
No Representative shall engage in any behaviour which would, directly or indirectly, discriminate based upon race, religion, color, sex, sexual orientation, age, national or ethnic origin, or physical disability.
Any individual who believes that he or she has been subjected to bullying, harassment or discrimination should immediately contact a member of senior management of the Company or the Chair of the Audit Committee. The identity of such individual involved will be kept strictly confidential and will not be revealed by the Company’s management or the Chair or the Audit Committee, as the case may be, without such individual’s permission. The alleged bullying, harassment or discrimination will be thoroughly investigated and documented by the Company and appropriate action will be taken. See the Company’s Workplace Bullying, Harassment and Violence Policy for additional details.
| 10. | ENVIRONMENT, HEALTH AND SAFETY |
|---|
Orla believes that sound environmental and occupational health and safety management practices are in the best interests of its business, its employees, its shareholders, and the communities in which it operates. Orla is committed to conducting its business in accordance with recognized industry standards and applicable environmental and occupational health and safety laws and regulations.
We expect all Representatives to promote a positive working environment for all and to consult and comply with all Company rules regarding workplace conduct and safety. All individuals should immediately report any unsafe or hazardous conditions or materials, injuries, and accidents connected with Orla’s business and any activity that compromises Company security to such individual’s supervisor or a member of management. Representatives are prohibited from working under the influence of any substances or behaving in any way that would impair the safety of others. See the Company’s Environmental, Sustainability, Health and Safety Policy, Corporate Social Responsibility Policy, Indigenous Peoples Policy and Climate Change Policy for additional detail.
| 11. | HUMAN RIGHTS |
|---|
The Company is committed to respecting internationally recognized human rights, across all of its projects and operations. The recognition of, and respect for, human rights is an essential component of the Company’s conduct and ethical values and underlies its commitment to ethical business conduct and corporate social responsibility wherever it operates. The Company seeks to integrate human rights best practices into the Company’s management, business relationships, governance structures and programs.
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The Company expects all Representatives to respect the human rights of all stakeholders and local communities in which the Company conducts business. The Company also expects its suppliers to prevent child and forced or compulsory labour and other forms of modern slavery, avoid discrimination and observe workers’ rights by respecting freedom of expression. No human rights violation by the Company or any Representative will be tolerated. Please refer to the Company’s Human Rights Policy for additional detail.
| 12. | PROTECTION AND PROPER USE OF ORLA ASSETS |
|---|
All Representatives should endeavor to protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company’s operations. Any suspected incidents of fraud or theft should be immediately reported to an individual’s supervisor or to a member of senior management for investigation.
Company assets, such as funds, products or computers, mineral samples and data may only be used for legitimate business purposes or other purposes approved by management. Company assets may never be used for illegal purposes. Representatives may not use materials, equipment or other assets of the Company for any unauthorized purpose. Representatives ceasing employment or engagement with the Company shall return all documents, data and other property belonging to the Company, including without limitation, computer hardware and software, databases, cellular phones, credit cards, books, etc.
| 13. | INTEGRITY OF RECORDS AND FINANCIAL DISCLOSURE |
|---|
As a public company, it is of critical importance that the Company’s financial filings with the appropriate regulatory authorities be accurate and timely. Depending on their position with the Company, an employee, officer or director may be called upon to provide necessary information to ensure that the Company’s public financial and other reports are complete, fair and understandable. Representatives must comply with prescribed accounting, internal accounting, and auditing procedures and controls at all times. All records must accurately reflect and properly describe the transactions they record. All assets, liabilities, revenues and expenses must be properly recorded on a timely basis in the books of the Company. Every Representative must be vigilant in preventing fraud and dishonesty, and report immediately any evidence of wrongdoing.
If a Representative has concerns or complaints regarding accounting or auditing issues, he or she is encouraged to talk to supervisors, managers or other appropriate personnel when in doubt about the best course of action and, if appropriate, submit those concerns to the Chair of the Audit Committee.
| 14. | USE OF E-MAIL AND INTERNET SERVICES |
|---|
E-mail and internet systems are provided to help Representatives do work. Incidental and occasional personal use is permitted, but never for personal gain or any improper purpose and shall not interfere with Representative’s duties. Additionally, “flooding” systems with junk mail and trivia hampers the ability of our systems to handle legitimate Company business and is prohibited. Access, transmission and downloading of any information that could be insulting or offensive to another person, such as sexually explicit messages, racial, ethnic or sexual slurs, or messages that could be viewed as harassment are expressly prohibited.
E-mail and internet systems and electronic data contained therein are the property of the Company and there is no expectation of privacy for those who use these systems. Unless prohibited by law, the Company reserves the right to access and disclose information contained on information technology systems as necessary for business purposes.
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| 15. | COMPLIANCE AND REPORTING |
|---|
The Company expects Representatives to take all responsible steps to prevent a violation of this Code. Any Representative who observes or otherwise becomes aware of any illegal or unethical behaviour shall report the violation as soon as reasonably possible. Representatives are encouraged to talk to supervisors, managers or other appropriate personnel when in doubt about the best course of action to take in a particular situation. Representatives may also contact a member of senior management or the Chair of the Audit Committee if appropriate.
The Company has also put in place an independent and confidential alternative reporting channel (web access: www.orlamining.confidenceline.net) to provide other means to raise and report ethics-related concerns. This alternative, which is available in English and Spanish, may be used anonymously and is administered by an independent third party to protect confidentiality and ensure proper escalation and follow-ups. All reports received will be treated with confidentiality to the extent permitted by law. All efforts will be made to ensure that the report and the identity of the reporter are only known to those directly involved in the assessment or investigation of the case.
As mentioned above, anonymous reporting is available. If you wish to do so, you may withhold from disclosing your identity when making a report. Please make sure to leave a communication channel open for follow-up questions and notifications if you decide to remain anonymous.
It is the policy of the Company not to allow retaliation for reports made of violations of this Code by others made in good faith. Retaliation in any form against an individual who reports a violation of this Code in good faith, or who assists in the investigation of a reported violation, is itself a serious violation of this Code. Acts of retaliation should be reported immediately to the individual’s supervisor or senior management, and the persons involved will be disciplined appropriately.
The Company has adopted an internal Whistleblower Policy. Please refer to it for further details. The Whistleblower Policy provides for a formal process for submitting complaints regarding accounting, internal accounting controls, auditing matters or fraud, with the ability to submit such reports on an anonymous basis. Employees are expected to cooperate in internal investigations of misconduct. These matters will be treated with discretion and diligence. If you wish to report an allegation anonymously, you must provide enough information about the incident or situation to allow the Company to investigate properly.
| 16. | WAIVERS OF THIS CODE |
|---|
From time to time, Orla may waive certain provisions of this Code. Waivers generally may be granted only by the Chief Executive Officer or the Chief Financial Officer. However, any waiver of the provisions of this Code for directors and executive officers, including the Chief Executive Officer and Chief Financial Officer may be made only by the Board or a committee of the Board and may be disclosed to shareholders as required by applicable rules and regulations.
| 17. | CERTIFICATION |
|---|
Each employee, officer and director will be required to certify on an annual basis that he or she has read this Code and is in compliance with it. The Code of Business Conduct and Ethics Certification Form attached to this Code as Schedule “A” will be distributed annually.
ADOPTED AND APPROVED BY THE BOARD ON DECEMBER 6, 2016.
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AMENDED AND APPROVED BY THE BOARD ON AUGUST 23, 2018.
FURTHER AMENDED AND APPROVED BY THE CORPORATE GOVERNANCE & NOMINATING COMMITTEE AND THE BOARD ON NOVEMBER 12, 2020.
FURTHER AMENDED AND APPROVED BY THE CORPORATE GOVERNANCE & NOMINATING COMMITTEE AND THE BOARD ON NOVEMBER 13, 2023.
- 8 -
Schedule “A”
ORLA MINING LTD.
Code of Business Conduct and Ethics Certification
I acknowledge that I have reviewed the Code of Business Conduct and Ethics (the “Code”) of Orla Mining Ltd. (the “Company”) and understand that I have an obligation to fully adhere to these policies and principles. I certify that I have not violated the provisions of the Code and, after due enquiry, I am not aware of any violations of the Code by other persons within my area of responsibility.
In particular, I acknowledge and affirm that in carrying out my responsibilities, I agree to adhere to the Code and I further agree that I have not, and will not, and will ensure that no person acting on my behalf or at my direction will, offer, promise, pay, or give, or authorize the offer, promise, payment, or giving of, any financial or other advantage, including money or anything of value, whether by direct or indirect means, to any person for the purpose of obtaining or retaining business, inducing that person or any other person to act, rewarding him/her for acting, or securing an improper advantage, improperly or otherwise. I certify that I have no knowledge that I or anyone acting on my behalf or at my direction has engaged or is engaging in such activities.
I also certify that I am using my best efforts to effectively implement the Code in a prompt and timely manner. I understand that I will be subject to disciplinary actions, including potential termination of my relationship and/or employment with the Company as a result of breaching any provision of the Code.
| | | |
|---|---|---|
| By: | | |
| | Signature | |
| | | |
| | | |
| | Printed Name | |
| | | |
| | | |
| Date: | | |
Exhibit 99.7
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our Firm under the caption “Interests of Experts”, and to the incorporation by reference in the following Registration Statements:
| 1. | Registration Statement on Form S-8 no. 333-272171 |
|---|---|
| 2. | Registration Statement on Form F-10 no. 333-271236 |
| --- | --- |
of Orla Mining Ltd. (the “Company”) and the use herein of our reports dated March 19, 2024, with respect to the consolidated balance sheets as at December 31, 2023 and 2022 and the consolidated statements of income (loss) and comprehensive income (loss) , changes in equity and cash flows for each of the years in the two-year period ended December 31, 2023, and the effectiveness of internal control over financial reporting of the Company as of December 31, 2023 included in this Annual Report on Form 40-F.
/s/ Ernst & Young LLP
Chartered Professional Accountants Vancouver, Canada
March 19, 2024
Exhibit 99.8
Consent of J. Andrew Cormier
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, J. Andrew Cormier, consent to the use of and reference to my name, including as an expert or "qualified person", and the inclusion and incorporation by reference in the Annual Report, of the information prepared by me, that I supervised the preparation of, or that was reviewed or approved by me that is of a scientific or technical nature and all other references to such information included or incorporated by reference in the Annual Report, including all information of a scientific or technical nature included or incorporated by reference in the Annual Report not otherwise covered by any other named expert therein.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ J. Andrew Cormier |
|---|---|
| | J. Andrew Cormier, P.Eng. |
| | Orla Mining Ltd. |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.9
Consent of Sylvain Guerard
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Sylvain Guerard, consent to the use of and reference to my name, including as an expert or "qualified person", and the inclusion and incorporation by reference in the Annual Report, of the information prepared by me, that I supervised the preparation of, or that was reviewed or approved by me that is of a scientific or technical nature and all other references to such information included or incorporated by reference in the Annual Report, including all information of a scientific or technical nature included or incorporated by reference in the Annual Report not otherwise covered by any other named expert therein.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Sylvain Guerard |
|---|---|
| | Sylvain Guerard, P. Geo. |
| | Orla Mining Ltd. |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.10
Consent of Stephen Ling
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Stephen Ling consent to: (i) the inclusion and incorporation by reference in the Annual Report of the mineral reserve estimate for the Camino Rojo Oxide Mine as at December 31, 2023 (the “Technical Disclosure”) that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and reference to my name, including as an expert or "qualified person", and my involvement in the preparation of the Technical Disclosure, in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Stephen Ling |
|---|---|
| | Stephen Ling |
| | Orla Mining Ltd. |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.11
Consent of Carl E. Defilippi
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Carl E. Defilippi, consent to the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective January 11, 2021, entitled “Unconstrained Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or "qualified person", and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Carl E. Defilippi |
|---|---|
| | Carl E. Defilippi, RM, SME |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.12
john j. ward, r.g. groundwater consultant llc
Consent of John J. Ward
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, John J. Ward, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective January 11, 2021, entitled “Unconstrained Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by
me; and (ii) the use of and references to my name, including as an expert or "qualified person", and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/John J. Ward |
|---|---|
| | John J. Ward, C.P.G. |
| | |
| | Dated: March 19, 2024 |
| 10564 E. George Brookbank Pl. | ph (520) 296-8627 | ward_groundwater@cox.net |
|---|---|---|
| Tucson, AZ 85747 | | |
Exhibit 99.13
Consent of Matthew D. Gray
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Matthew D. Gray, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective January 11, 2021, entitled “Unconstrained Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or "qualified person", and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Matthew D. Gray |
|---|---|
| | Dr. Matthew D. Gray, Ph.D., C.P.G. |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.14
Consent of Michael G. Hester
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Michael Hester, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective January 11, 2021, entitled “Unconstrained Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; (ii) the inclusion and incorporation by reference in the Annual Report of the mineral resource estimate for the Camino Rojo Oxide Mine as at December 31, 2023 (together with the Technical Report, the “Technical Disclosure”) that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (iii) the use of and references to my name, including as an expert or "qualified person", and my involvement in the preparation of the Technical Disclosure in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Michael G. Hester |
|---|---|
| | Michael G. Hester, FAusIMM |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.15
Consent of Jordan Anderson
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Jordan Anderson, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Jordan Anderson |
|---|---|
| | Jordan Anderson, QP RM-SME |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.16
Consent of Benjamin Bermudez
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Benjamin Bermudez, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Benjamin Bermudez |
|---|---|
| | Benjamin Bermudez, PE |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.17
Consent of Richard DeLong
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Richard DeLong, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Richard DeLong |
|---|---|
| | Richard DeLong, QP MMSA, RG, PG |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.18
Consent of Thomas L. Dyer
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Thomas L. Dyer, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Thomas L. Dyer |
|---|---|
| | Thomas L. Dyer, PE |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.19
Consent of Art S. Ibrado
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Art S. Ibrado, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Art S. Ibrado |
|---|---|
| | Art S. Ibrado, PE |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.20
Consent of Michael S. Lindholm
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Michael S. Lindholm, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Michael S. Lindholm |
|---|---|
| | Michael S. Lindholm, CPG |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.21
Consent of Kevin Lutes
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Kevin Lutes, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Kevin Lutes |
|---|---|
| | Kevin Lutes, PE |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.22
Consent of Matthew Sletten
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Matthew Sletten, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
| | /s/ Matthew Sletten |
|---|---|
| | Matthew Sletten, PE |
| | |
| | Dated: March 19, 2024 |
Exhibit 99.23
Consent of Gary L. Simmons
In connection with the Annual Report on Form 40-F, and any amendments and exhibits thereto, of Orla Mining Ltd. (the “Company”) for the year ended December 31, 2023 (collectively, the “Annual Report”), I, Gary L. Simmons, consent to: (i) the inclusion and incorporation by reference in the Annual Report of references to and information derived or summarized from the technical report dated effective February 23, 2022, entitled “South Railroad Project Form 43-101F1 Technical Report Feasibility Study, Elko County, Nevada” (the “Technical Report”), or portions thereof, that was prepared by me, that I supervised the preparation of and/or was reviewed and approved by me; and (ii) the use of and references to my name, including as an expert or “qualified person”, and my involvement in the preparation of the Technical Report in each case where used or incorporated by reference into the Annual Report.
I also consent to the use of my name in and the incorporation by reference of such information contained or incorporated by reference in the Annual Report and exhibits thereto into the Company’s Registration Statement (No. 333-271236) on Form F-10 and Registration Statement on Form S-8 (File No. 333-272171), in both cases as amended.
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| | /s/ Gary L. Simmons |
| | Gary L. Simmons, QP MMSA |
| | Dated: March 19, 2024 |