Orla Mining Ltd. [OLA-TSX; ORRLF-OTC] said Friday February 26 that it obtained approval from the Mexican Federal Competition Commission, a development that triggers a layback agreement with Fresnillo plc regarding the companyâ€™s Camino Rojo Oxide gold project in Zacatecas, Mexico.
Under the terms of the layback agreement, Orla will pay Fresnillo US$62.8 million in cash via staged payments with the first payment of US$25 million due upon closing.
The layback agreement allows Orla to expand the Camino Rojo oxide pit onto part of Fresnilloâ€™s mineral concession adjacent to Orlaâ€™s property. Orla will have access to the oxide and transitional heap leachable resources on Orlaâ€™s property below the open pit outlined in the June, 2019, feasibility study.
The layback agreement will provide Orla with the right to mine from Fresnilloâ€™s concession and recover for Orlaâ€™s account, oxide and transitional material amenable to heap leaching within an expanded open pit.
An updated feasibility study on Camino Rojo unconstrained by Orlaâ€™s previous property boundary outlines the economic impact of the additional mineral resources from Orlaâ€™s concession available for processing as a result of the agreement.
In a January 11, 2021 press release, Orla said highlights of updated feasibility study include a 54% increase in contained gold reserves and a 3.5-year life extension of the project, currently in construction. The study supports a simple open pit mine and heap leach operation. However, the most notable changes from a 2019 feasibility study are an increase in the size of the open pit, heap leach pad, and waste dump as a result of the agreement. According to the study, proven and probable reserves stand at 1.59 milllion ounces gold and 31.5 million ounces silver.
Key assumptions include a 10.4-year mine life and average annual production of 94,000 ounces gold and 597,000 ounces silver. The all-in-sustaining cost is expected to be US$543/oz. Life-of-mine capital requirement is forecast at US$158 million.
Orla acquired the Camino Rojo from Newmont Goldcorp Corp. [NGT-TSX; NEM-NYSE] in November 2017 in return for issuing 32 million Orla shares, or 19.9% of shares outstanding.
The company has already received a key environmental permit it needs to begin development. First production is planned for late 2021.
On Friday, Orla shares fell 5.5% or 26 cents to $4.44 and now trade in a 52-week range of $7.51 and $1.48.