Orla eyeing Fresnillo land deal to unlock value at Camino Rojo

Orla Mining chairman Chuck Jeannes is optimistic of unlocking additional value at the Camino Rojo project in Mexico through a land deal with Fresnillo.

Orla announced a PEA for the Zacatecas state gold-silver project outlining an 18,000t/d throughput open pit mine contained within its existing concessions.

But the company is in talks to extend the pit wall past its property line and into concessions held by Fresnillo to the north, enabling Orla to mine additional deeper material.

Orla has had several conversations with Fresnillo regarding this prospect, according to Jeannes, former CEO of Goldcorp. Goldcorp sold Camino Rojo to Orla in November 2017.

"There are no guarantees, but we will continue to work on it and I don't see any reason why we shouldn't be able to get a deal," he told a conference call.

"There is economic value there for both parties and value that will not or cannot be exploited without an agreement. It will be in the commercial interest of both of us to get something done so I think we will."

TIMELINE

Orla plans to advance Camino Rojo regardless of whether a deal is struck with Fresnillo.

A feasibility study, due for completion in 2Q19, is underway based on the constrained pit described in the PEA. Pending a positive construction decision, first production is earmarked for 2021.

If a deal is agreed with Fresnillo, the project can be expanded to incorporate the larger pit outline at a later date, COO Hans Smit told the call.

"There's nothing worse than the party on the other side [in a land negotiation] knowing you're under a timeline. We aren't."

PEA

The PEA envisages a low-cost heap leach mine producing an average 97,500oz/y gold over seven years of operations.

Cash costs are estimated at US$499/oz gold, with all-in sustaining costs of US$555/oz. The figures are net of by-product credits.

Initial capex is US$125mn, with post-tax IRR at 24.5%, assuming US$1,250/oz gold and US$17/oz silver prices. Goldcorp retains a 2% net smelter return royalty.

Other opportunities to enhance the project include steepening the north pit wall, reducing capex by increasing the crush size and boosting silver recoveries from the 15% described in the PEA.

Studies are also continuing to evaluate options for the deeper sulfide material, which currently contains 7.3Moz of gold in measured and indicated resources.

Orla also has the Cerro Quema gold project in Panama.