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Mexico-focused precious metals miner Orla Mining (TSX: OLA; NYSE: ORLA) is expanding its footprint into the US with the acquisition of Gold Standard Ventures (TSX: GSV; NYSE: GSV), whose main asset is the South Railroad open-pit project located on the Carlin trend in Nevada.
Earlier this year, Gold Standard completed a feasibility study for the South Railroad gold project, outlining a million-ounce operation capable of producing 124,000 oz. annually over an estimated eight-year mine life.
The project has a $315 million after-tax net present value at a 5% discount rate and a 44% internal rate of return. Its initial capital cost is pegged at $190 million. Permitting of South Railroad is currently progressing towards a record of decision from the US Bureau of Land Management.
The acquisition of South Railroad would add another 1.6 million oz. of proven and probable gold reserves (65.2 million tonnes at 0.77 g/t) to Orla’s existing reserve base at the Camino Rojo oxide mine, which itself contains 1.6 million oz. (67.4 million tonnes at 0.73 g/t).
“This acquisition advances our strategy of creating stakeholder value through responsibly building and operating a portfolio of high-margin, cash-generating assets with superior geological prospectivity,” Orla’s CEO Jason Simpson said in a news release. “The South Railroad project is analogous to our recently completed Camino Rojo mine – a low capital intensity, open pit, heap leach project in a desirable location with exploration upside.”
Gold Standard also owns the Lewis project, which comprises a large land package on the Battle Mountain trend. It lies adjacent to the north of South Railroad and within the boundary of Nevada Gold Mines’ Phoenix operation.
Under a definitive agreement signed between the companies, Gold Standard shareholders will receive, for each share held, 0.1193 of an Orla common stock and C$0.0001. This implies a purchase price of C$0.655 per Gold Standard share, or gross consideration of C$242 million ($187.6 million), representing a 35% premium based on companies’ stock prices at market close on June 10, 2022.
Post closing, existing shareholders of Orla and Gold Standard will respectively own approximately 87% and 13% of the combined company.
Shares of Gold Standard surged 11.3% by market close Monday following news of its acquisition by Orla. The company currently has a market value of C$193.72 million ($150.2 million).
