Orla Mining’s Opportunities Go Beyond Commercial Production

Q: What was the main achievement for the company in 2021?

A: The most remarkable achievement was at Camino Rojo in Zacatecas, where we had the first gold pour shortly after 12 months of construction. The Mexico team is working to maintain that ramp-up by accelerating the mine and processing plant with the goal of reaching commercial production by the end of the 1Q22. In addition, we are using the ramp-up period to identify and resolve bottlenecks, while increasing daily production, execution time and performance.

Q: What strategic steps is the company taking to start commercial production?

A: Our priority is for the processing facilities to reach their capacity of 18,000 tons per day. A key factor will be keeping our employees safe, which has been a great challenge due to the pandemic. In 2021, we designed and built the mine with approximately 1,000 people on site under safe and healthy conditions. In addition, we seek to maintain our excellent performance as we ramp up in the first quarter of 2022 and then move to commercial production, which will lead to strong cash-flow generation which will finance our growth, especially with our exploration programs in Mexico. We believe there are many opportunities to find additional ounces of gold near our existing infrastructure. Furthermore, we will continue to make progress and evaluate the sulphide project below the oxide pit, as we think there is still a great deal of value to unlock.

Q: How do you think the project will be affected by market conditions for gold and silver?

A: In 2020, we were very fortunate to have ordered most of our major capital components for Camino Rojo, thereby avoiding some of the strong inflationary pressures in 2021. Our focus in 2022, amid such an environment, will be to keep our total costs low. The Camino Rojo oxide project is a low-cost operation and we believe that the healthy price of gold, which has been reasonably stable in recent years, will allow us to continue generating strong cash flows. The project is lower cost in part because we are located in the state of Zacatecas,  a region very familiar with mining, which makes it easier to find highly qualified employees, suppliers and service providers. In addition, the open pit processing that we have developed and will continue to mine in the next decade is an ore body that is close to the surface on flat ground, resulting in a low strip ratio and, therefore, lower cost. On the processing side, we have oxide ore that is amenable to heap leaching, which is a cost-effective processing method. All these variables contribute to a low all-in sustaining cost of about US$600 per ounce. Compared to the gold price, which is US$1,800 an ounce, this project generates strong margins.

Q: What are the main strategies the company will implement to increase the profitability of the project?

A: The project should generate strong margins . However, our goal is to reach nominal capacity in 1Q22 and after achieving that, we will work immediately to increase capacity. We believe there is a great opportunity to improve the tons-per-day production. In addition, our team will find ways to save money and maintain our profit margin for our shareholders. There are also two pieces that will add value to our Mexican assets. One is to find more gold in the 160,000ha that we have under our concession and process it in our infrastructure that is already built. Second, there are 9 million additional ounces of gold that are in a sulphide format underneath our oxide pit, which is a tremendously important way to enhance Orla’s value. However, this will require a new processing plant and this is a potential future investment in Mexico that we want to achieve.  Nevertheless, this is a long-term plan. The first step was to develop the oxide project and bring it to full capacity. Then we will work to optimize it and try to find more gold. The future for Orla in Mexico is very bright.

 Q: What do you think is the best approach to further unlock the value of the project?

A: We have many options and as a result our plans have not yet solidified. We are considering an open pit scenario, meaning we could exploit a larger resource but with a lower overall grade. Another scenario is underground, which means that we would have the ability to extract a higher-grade portion of the mineral deposit with less waste. The last option is processing ore at Newmont’s Peñasquito’s plant, which would save us the capital cost of construction but would force us to cede 70 percent of the sulphide project value to Newmont. We are conducting studies to analyze these options and then compare their results regarding mineral resources, recovery rates, capital and operating costs. The end game is to generate the greatest possible value for Orla's stakeholders, communities and employees. We do not know yet what the best approach will be but we hope to reach a decision later this year.

Q: What is the company's ESG approach for 2022?

A: Zacatecas is a very good jurisdiction for projects but even in the best jurisdictions, companies still have responsibilities to fulfill. ESG is of great importance and underpins company decision-making. For Orla, ESG is highlighted by our care for employees, host communities, countries, environment, assets and investments. We believe that if we can generate benefits for all of our stakeholders, we will strengthen the long-term sustainability of our business. In addition, if you want to be considered a good long-term investment option, you need to manage your business responsibly and that includes all ESG matters.

Q: What are the company's exploration goals for 2022?

A: For the first time in Orla´s history, we can now afford to do some exploration, since we are producing. Our exploration efforts in 2022 can be classified into two types: expanding the oxide and sulphide deposits and finding new deposits in our concession. As a result, our programs in 2022 will be to expand the oxide project that we just put into production. We will also carry out a second phase of drilling in the larger and deeper sulphide ore body, which lies below the oxide pit.

In 2021, we successfully established a new drill orientation that intersected wide zones of higher-grade material. Therefore, we intend to complete another drilling phase in 2022 in this more optimal orientation in another area of the deposit. This is an exciting year for Orla because for the first time, we are going to be able to work outside the known deposits and enter the larger part of the land package to complete regional exploration. The team has already completed the targeting program and has identified several very promising targets. We plan to drill those targets and see more of Camino Rojo’s potential.

Q: Beyond the plans you have mentioned, what can be expected from Orla in 2022?

A: We have always said Camino Rojo is  foundational to the building of our mining company. I believe that we successfully established that foundation in 2021. Now that we are further advanced, we also want to take advantage of other opportunities. Orla’s team, and specifically our Mexican team, has a great deal of knowledge and history of operating in Zacatecas, and this will be important as we optimize our oxide operations and unlock value in the sulphides. We have had great results thus far.

 Orla Mining is developing the Camino Rojo project, a high-quality, advanced oxide heap leach project in a low-risk jurisdiction. The company emphasizes a systematic approach to project development and strong shareholder returns.