Orla Mining Ltd

Good morning ladies and gentlemen and welcome to Orla Mining's conference call for the third quarter 2023 results. My name is Chris and I'll be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you'd like to ask a question during this time simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question please press the pound key. Please be advised that this call is being recorded. I'd like to turn the meeting over to Jason Simpson, President and Chief Executive Officer of Orla Mining. Please go ahead, Mr. Simpson.

Thank you, operator, and welcome to Orla's third quarter 2023 results conference call. We will be making forward-looking statements during today's call, and I direct you to the first and second slides of this presentation, which contains important cautionary notes regarding these forward-looking statements. All dollar amounts discussed today will refer to U.S. dollars, unless otherwise indicated. Our third quarter was highlighted by an environmental management, including a safety award Andrew will highlight. Continued operational and cost performance at Camino Rojo. As a result of our continued outperformance at Camino Rojo, we have increased our 2023 production guidance. testament to our team's continued execution as well as the strength of the asset because of our cost management and the strength of operations we continue to generate strong cash flow and strengthen our balance sheet our net balance at quarter end stood at three million dollars i'm also pleased to communicate that we renewed our collective bargaining agreement with our team in mexico a vote of confidence for the strength of our relationship with this team. We continue to systematically work through our extensive exploration program with a focus on Mexico and Nevada, which will support our growth ambitions. The ongoing events in Panama are something I'll discuss on this call. We have the full executive team on the call to provide specific updates. Over to Andrew Cormier, our Chief Operating Officer, for the Q3 operational update.

Thank you, Jason. The third quarter was marked by continued strong mining and processing performances at Camino Rojo. We did this while maintaining the health and safety of our team. This year, Camino Rojo was awarded the 2022 Silver Helmet Award for open-fit mining. by the Mexico Mining Chamber, ChemMex. This award is the highest award in the Mexican mining industry, recognizing companies and workers for safety at their operations. 1.8 million tons of ore was mined at a strip ratio of 0.59 and an average grade of 0.81 grams per ton gold. The average grade of ore processed during the quarter was 0.85 grams per tonne gold. An average stacking rate of 19,205 tonnes per day was achieved, another quarter above plant nameplate capacity. Mine ore tonnes and grade are reconciling well to the block model, and processing recoveries remain in line with the metallurgical recovery model. Gold production in the third quarter was a record, with 32,425 ounces of gold poured. Subsequent to quarter end, October was our record month for gold production with 11,760 ounces of gold produced. We are well on track to achieve our increased guidance range of 110 to 120,000 of ounces of gold. Based on laboratory column tests, we made some adjustments to our crushing circuit and decreased our final product size during the quarter. The initial operational impacts to recovery have been positive and we will continue to monitor the results. Stay tuned for future updates on this initiative. As previously mentioned, we are mining less waste than initially planned this year as we await permit amendments from the Mexican Authority. We've had some positive indications from Semernet and we hope to have amendments in hand by year end which will allow us to start mining in these areas in early 2024. I will now pass the call over to Eti Amore, our Chief Financial Officer, to discuss the financial results for the quarter.

Thanks, Andrew. During the quarter, we sold 31,000 ounces of gold at a realized price of $1,921 per ounce, resulting in $60 million in revenue for the period. Our net income for the quarter was $5.4 million, or 2 cents per share. After adjusting for a few items, including unrealized foreign exchange gain and a loss on early settlement of our credit facility, adjusted earnings were $6.6 million, or also 2 cents per share. It should be noted that during the quarter, we expensed about $11 million in exploration and project costs as we continue to advance our growth pipeline in Mexico and Nevada. All-in sustaining costs for the third quarter was $743 per ounce, and on a year-to-date basis, our all-in sustaining costs is $712 per ounce. It's worth mentioning that we're going to accelerate the construction related to the third expansion phase of the heap leach paddock in Mino Rojo, and we'll be bringing forward an additional $4 million in sustaining capital into Q4, spending that was otherwise scheduled to be taking place in the first half of 2024. The remaining $8 million in sustaining capital for this project will be spent in Q1 and Q2 of next year. Even with this additional capital in the fourth quarter, we remain confident in achieving our revised all-in sustaining cost guidance of $700 to $800 per ounce per year. Cash flow from operating activities before changes in non-cash working capital was $21.8 million, or 7 cents per share. but a quarter, and we added close to $19 million in pre-cash flow in the third quarter. To quickly summarize some of the quarter over quarter variances in net income, we provided a simple graph to show the key changes. This quarter, we saw more exploration spending, predominantly in Nevada, where we took advantage of the dry summer season to advance our work programs. Cost of sales was higher this quarter as we sold more gold during the period, and we had a one-time charge of $1.4 million related to the accrual of wages and bonuses resulting from the successful completion of our collective bargaining agreement in Mexico. During the quarter, we amended our credit facility to a $150 million revolving facility at a lower cost of capital. The new facility removes mandatory quarterly repayments and extends to August 2027. I'd like to thank our lenders, Scotia, BMO, and CIBC for their continued support. Of the $150 million facility, we had $113 million outstanding at the end of the quarter, and subsequent to quarter end, we made a $25 million repayment, which brings our current outstanding balance to $88 million. A QUICK REMINDER THAT IN DECEMBER WE'LL BE MAKING OUR THIRD AND FINAL PAYMENT OF $22.8 MILLION TO FRESNIO AS PART OF THE LAYBACK AGREEMENT. WE HAD A CASH BALANCE OF NEARLY $133 MILLION AT QUARTER END AND CONTINUED OPERATIONAL CASH FLOW GENERATION AT COMMUNA ROJO AND THE DEBT REPAYMENT INCLUDING THE FRESNIO PAYMENT. OUR BALANCE SHEET IS IMPROVING EVERY DAY AND WE ANTICIPATE TO BE IN A NET CASH POSITION BY THE END OF THE YEAR. Over to Shafika, our Chief Sustainability Officer now, who will provide some update on our people approach.

Thank you, Etienne. Last quarter, I discussed how proud we were with the release of our inaugural sustainability report. Certainly an important milestone for our growing company. This quarter, I would like to talk about our approach to people, as well as to mention the successful agreements we achieved with our collective bargaining agreement renewal at our Camino Rojo in Mexico. Our employees and workers, including contractors, are vital to our business. We want and need them to be aware that they are part of our shared success. We aim to have a productive, safe, and healthy work environment where we operate with consistency, work together, and support our mutual growth. In order to have our people wanting the company to succeed, we must take care of our employees' basic needs, a safe and healthy work environment, clearly defined work, and fair and competitive compensation and benefits. We provide our employees with access to training and development that will help them advance their skills and get them closer to their aspirations. Employees help the company operate in a stable, healthy, and productive way through communication and effective actions to mitigate risk. We are honest and open We lead all our relationships with care, including the one with our employees. We believe this genuine and transparent approach helps our shared success to increase our long-term sustainability as a business. As for our relationship with our employee union, we see them as our operating partner. We understand their position They recognize our position and together we seek to work proactively. As an example, Orla worked to ensure medical and health benefits were universally available without exclusion. This was a voluntary initiative from our company, something we believed was a benefit to our workforce. In short, Our employees are critical to our success, and we work hard to nurture this important relationship. And with that, I'll pass the voice to Sylvain Gerard, our Senior Vice President, Exploration.

Thanks, Shafiqa. In the third quarter, we invested just over $12 million into exploration on our projects, as we advanced the Camino Rojo sulfide deposit and exploration at South Railroad in Nevada. As a reminder, our 2023 exploration budget across the portfolio is $35 million, mostly focused on Mexico and Nevada. At the end of the third quarter, we had incurred $26 million out of the $35 million. At Camino Ojo, a large portion of the 2023 program is focused on the sulfide infill drilling and approximately 80% of the planned 34,000 meter has been completed. The intention of this program is to advance our understanding of the deposit. Approximately 20% of the 2023 sulfide drill holes are planned to be extended beyond the boundaries of the current open pit resource estimate to test the down plunge continuity of the globalization. As reported earlier this year, One of the drill holes intersected significant polymetallic sulfide replacements by mineralization beneath the caracal formation-hosted sulfides along and adjacent to a dike structural zone. Based on an updated geological model and success of all 15C, a drill section was designed to follow up on historical drill results 250-meter down plunge of hole 15C. Based on visual core results from holes on the section, sulfide mineralization remains open at that. In drilling, it's planned to further assess the potential of the sulfide extension. We will look to provide the results once we complete this year's program. In-field drilling into the Camino Jojo, sulfide continues to intercept wide-zone higher-grade gold minimization, and in conjunction with meteorological results from 2022, continues to support the potential for underground development and a standalone processing option for chemical sulfides. The 2023 infield drilling is planned to be completed in the fourth quarter and is expected to inform a future update to a potential underground resource estimate mining methods, and production decisions. It's also worth noting that the near-mine layback oxide drilling was completed. This new information will be reflected in the year-end 2023 resource and reserve statement to be provided early next year. In addition, the Regional Exploration Drill Program is testing priority targets in an effort to make new satellite discoveries. Approximately 85% of the planned 15,000-meter regional program has been completed to date, with the focus on Camino Rojo Mine Trend and at other regional targets. In Nevada, our exploration program is progressing well since the acquisition of Gold Standard Venture less than 16 months ago. The exploration objectives at South Railroad are to upgrade and grow resources and drill tests multiple targets for new discoveries. drilling rent up in the second and third quarter focused on infield drilling to support upgrading resource at North Bullion Deposit, testing the pit extensions potential of the Dart Spire and Pinion Deposit, and drilling other targets across our large land position. We are excited about the opportunities ahead at South Railroad and look forward to keeping you updated on our future developments. I will now pass the call back to Jason.

Thanks, Sylvain. As the executive team has outlined for you, the Orla business fundamentals are strong based upon excellent sustainability performance, overachievement in production, and our discipline to maintain our position as one of the lowest cost producers in the industry. I think it is important that we touch on the ongoing resource development prospects in Panama. Like many, we are following the recent events in Panama leading up to the 2024 elections. Earlier in 2023, we saw great progress in the country to support mining investment and fiscal stability. First, we received the environmental permit for our Cerro Quema project, which was an important step for its development. Then, a new contract was agreed upon between the government of Panama and First Quanta. which they subsequently passed into law, another positive step. However, more recently, in response to opposition of the newly ratified law for Cobra Panama, the government is seeking judgment from their Supreme Court on its constitutionality and placed a moratorium on resource exploration and development. The impact of these recent developments on the company's Cerro Cama project remains uncertain. The company expects that various factors, including potential court challenges in the May 2024 Panamanian general election, may impact its strategy in Panama. The company will continue to monitor these developments and make an informed assessment of its strategy once additional information is available. We have and will continue to take a conservative approach to spending and development in Panama. awaiting more certainty to inform our strategy. Our Cerro Queima project in Panama is a potential area for growth for Orla, among others. It's a solid project with solid economics. We also believe that the responsible development of Cerro Queima would be an important social and economic contributor to the host communities and governments. Finally, The presence of copper and gold on our property and the geologic potential for more in the nation has not changed and could be developed in a responsible way for the benefit of all stakeholders. I'd like to give special attention to the members of our team, the government of Zacatecas, as well as our industry colleagues who supported us recently as we evacuated Acapulco, Mexico. There was a large mining conference taking place in Acapulco, where our Camino Rojo team was receiving the Silver Helmet Award, recognizing our achievements in people safety. Hurricane Otis, the largest hurricane to ever hit the Pacific Coast, made devastating landfall during the conference, resulting in significant human and property destruction. It was the solidarity of our team and this industry that allowed us to return home safely. In a world where various destructive scenarios have unfolded, please consider making positive differences where you can. As we drive toward year-end, we are on track to achieve our increased production and reduced cost guidance. That performance has us on track to be net cash positive in the near term. Thank you to our team who remained steadfast in their commitment to Orla's strategic objective of creating value for stakeholders. At this point, I'd like to turn the call to the operator for questions.

Thank you. As a reminder, if you would like to ask a question, please press star then one on your telephone keypad. Again, star one to ask a question. And we'll pause for just a moment to compile the Q&A roster. Again, please press star 1 if you'd like to ask a question. It appears that we have no questions. I'll turn it back to Mr. Simpson for any closing remarks.

Since there are no questions, I would like to thank you for your time. Never hesitate to reach out to ORLA should you have any follow-up questions.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.