2020 Construction Phase Eyed for Camino RojoThu, 10/17/2019 - 16:23
Q: What are Orla Mining’s main activities in Latin America and how is it proceeding in Mexico?
A: Orla Mining has two projects with over 10 million oz of gold resources between Mexico and Panama, with most of our resources and exploration in Mexico. The company has over 206,000ha of exploration ground located in Zacatecas, Mexico, including the Camino Rojo Oxide Project, a simple oxide, heap leach, open-pit mine. We will continue to study and explore our second asset, located in Panama, but our main focus in the short term is in Mexico. Camino Rojo was purchased from Goldcorp, which continues to hold a 20 percent share. This year, the company’s goals are to complete the feasibility study, get the required permits approved and obtain a financing package enabling a construction phase by 2020. This year, we will go to the market for a mixture of debt and equity totaling up to US$200 million. The capital construction cost for our first project in Mexico is US$125 million. Our target ensures we have enough working capital and can continue exploration. In addition, we have an interesting opportunity with Fresnillo, which is our concession neighbor to the north. A pit lay-back agreement with Fresnillo enables us to access more gold on our property at depth that would increase the project’s in-pit gold ounces from 1 million oz to at least 1.7 million oz.
Q: What added values make a company like Orla Mining different from other gold producers?
A: The first necessity is to have good assets and Camino Rojo covers this requirement. Second is our management team. You need a management team that is capable and experienced. Some teams are effective at exploring and finding the assets but the skills needed to progress a major mining development are rare. The management team that will design and construct this project understands the technical, social, and commercial requirements involved in a mining development. Technically, you need good engineering to ensure the best design. Our team has that experience. Finally, a company can have a good asset, put together a great management team and achieve good community relations but if it does not have the money it will not be possible to develop anything. The credibility of this team, our board of directors and key shareholders will aid us in the commercial aspect of this development.
Q: What hurdles is the company overcoming to ramp up this project?
A: Last year, we published a Preliminary Economic Assessment (PEA) on the Camino Rojo Oxide Project and the company is working on the next step, a Feasibility Study (FS) scheduled to be completed by mid-year. We need to make sure that we focus on a feasibility study that is consistent with investor expectations and our own to approve construction. Second, we need to hear from the new federal administration.
Security of mineral tenure, efficient and appropriate regulatory processes for review and approval are required. The new administration needs some time to get its feet on the ground but it seems to be very engaged with this industry. Additionally, raising up to US$200 million and securing this funding by the end of 2019 will be a challenge in the current market. Finally, we intend to build the project in 2020 consistent with the PEA we published last year, which has no consideration of the agreement with Fresnillo.
Q: What are your production targets and strategy for 2021 at Camino Rojo?
A: The overall average annual throughput for the deposit is close to 100,000oz but there is always a ramp-up to that amount. For instance, in the first production year, 2021, our PEA defined a production output of 67,000oz. That will rise to 94,000oz in year two and over 110,000oz the third year. Camino Rojo Oxide Project has a seven-year mine life with an average production of 97,500oz per year. This production rate is based on last year’s PEA, which has no consideration of working with Fresnillo. An agreement with Fresnillo will give us the opportunity to increase our throughput and increase annual gold production but we will continue to move forward with the development of the project with or without that agreement.