Fed tests gold upleg
Gold’s outlook and fundamentals remain really bullish.
Results from near-pit exploration at Orla Mining’s (TSX: OLA) Camino Rojo gold mine in Mexico show strong potential for expanding resources and ultimately extending the current 10-year mine life, the company said Thursday.
The successful drilling program in the proposed layback area near the open pit mine demonstrates the potential to replenish some of the mine’s diminished gold by integrating additional surface oxide gold found nearby, Sylvain Guerard, Orla’s senior vice president, said in a news release.
Located north of the Camino Rojo mine, drilling in this area has confirmed historical results, showing consistent grade along the property boundary. Highlights include 1.09 grams gold per tonne over 21 metres to the west and 0.85 gram gold over 76 metres to the east.
The drilling beneath the current open pit has unveiled structurally controlled oxide mineralization about 50 metres below and 15 metres southeast of the current pit boundaries. Notable results here include 1.16 grams gold per tonne over 67.1 metres and 0.86 grams gold over 35.1 metres.
Earlier this week, Orla reported record production of 121,877 oz. gold from the mine in 2023, slightly above guidance of 110,000-120,000 ounces. It expects to produce 110,000-120,000 oz. from the mine this year at an all-in sustaining cost of $875-$975 per ounce. It has not yet disclosed the all-in sustaining cost figures for 2023 and is scheduled to release its fourth-quarter results on March 20.
The drill results are part of a 6,500-metre program Orla completed at Camino Rojo last year to explore for additional oxide mineralization. This included 2,500 metres in the adjacent Fresnillo property, or ‘Layback Area,’ and 4,000 metres targeting deeper oxide gold mineralization extensions beyond the current open pit.
Orla has secured a layback agreement with Fresnillo, allowing it to expand the Camino Rojo oxide pit into Fresnillo’s adjoining concession. This deal not only allows Orla to mine significant additional oxide and transitional heap leachable resources but also preserves Fresnillo’s rights to the future development of the sulphide resource. The deal is expected to notably increase Orla’s mineral reserves and enhance the mine’s value without requiring changes to the current infrastructure.
These results pave the way for the 2024 near-mine drill program, which is still being finalized.
BMO Capital Market mining analyst Andrew Mikitchook assigns an ‘outperform’ rating to Orla with a target price of C$7.50. Shares on Thursday closed 5.7% higher at C$4.47, having touched C$3.53 and C$6.90 over the past 12 months. It has a market capitalization of C$1.4 billion.
Mikitchook expects Orla to publish an updated resource before the end of June, which will incorporate drilling from the layback area for the first time.
“We remain cautiously optimistic following the high-grade intercepts located down-dip and underneath the open pit,” he wrote in a note to clients, adding the results demonstrated potential to extend the mine life.
Camino Rojo has measured and indicated oxide resources of 84.4 million tonnes grading 0.72 grams gold per tonne for 1.9 million oz. of metal. It also has a sizeable sulphide component of 258.8 million tonnes grading 0.88 grams gold per tonne for 7.3 million oz. of metal. Proven and probable reserves total 58.5 million tonnes at 0.74 gram gold per tonne for 1.4 million ounces.
Elsewhere in the portfolio, in December, Panama’s government rejected its request for permit extensions for the Cerro Quema gold project and cancelled the mining concessions by designating the area a reserve. Orla has halted further investment in Panama, where the government recently shut down First Quantum Minerals’ (TSX: FM) Cobre Panama mine.
