Orla Mining Ltd. [OLA-TSX; ORRLF-OTC] said Friday February 26 that it obtained approval from the Mexican Federal Competition Commission, a development that triggers a layback agreement with Fresnillo plc regarding the company’s Camino Rojo Oxide gold project in Zacatecas, Mexico.
Under the terms of the layback agreement, Orla will pay Fresnillo US$62.8 million in cash via staged payments with the first payment of US$25 million due upon closing.
The layback agreement allows Orla to expand the Camino Rojo oxide pit onto part of Fresnillo’s mineral concession adjacent to Orla’s property. Orla will have access to the oxide and transitional heap leachable resources on Orla’s property below the open pit outlined in the June, 2019, feasibility study.
The layback agreement will provide Orla with the right to mine from Fresnillo’s concession and recover for Orla’s account, oxide and transitional material amenable to heap leaching within an expanded open pit.
An updated feasibility study on Camino Rojo unconstrained by Orla’s previous property boundary outlines the economic impact of the additional mineral resources from Orla’s concession available for processing as a result of the agreement.
In a January 11, 2021 press release, Orla said highlights of updated feasibility study include a 54% increase in contained gold reserves and a 3.5-year life extension of the project, currently in construction. The study supports a simple open pit mine and heap leach operation. However, the most notable changes from a 2019 feasibility study are an increase in the size of the open pit, heap leach pad, and waste dump as a result of the agreement. According to the study, proven and probable reserves stand at 1.59 milllion ounces gold and 31.5 million ounces silver.
Key assumptions include a 10.4-year mine life and average annual production of 94,000 ounces gold and 597,000 ounces silver. The all-in-sustaining cost is expected to be US$543/oz. Life-of-mine capital requirement is forecast at US$158 million.
Orla acquired the Camino Rojo from Newmont Goldcorp Corp. [NGT-TSX; NEM-NYSE] in November 2017 in return for issuing 32 million Orla shares, or 19.9% of shares outstanding.
The company has already received a key environmental permit it needs to begin development. First production is planned for late 2021.
On Friday, Orla shares fell 5.5% or 26 cents to $4.44 and now trade in a 52-week range of $7.51 and $1.48.