Orla set to acquire Ontario gold mine from Newmont

Orla Mining Ltd. [OLA-TSX] has announced a strategic expansion into Canada with the acquisition of the Musselwhite Gold Mine in northwestern Ontario from Newmont Corp. [NGT-TSX, NEM-NYSE, ASX, PNGX] for $810 million cash. Orla has also agreed to pay a gold-linked consideration of $40 million. The contingent consideration is payable as follows:

• $20 million to be paid should the average spot gold price exceed US$2,900 an ounce for an initial one-year period following the transaction.
• $20 million to be paid should the average gold price exceed US$3,000 for the second full year period after the transaction closes.

As Newmont is a “related party” of Orla, the transaction will require the majority approval of company shareholders other than Newmont.

The combination of the proven Musselwhite mine and Orla’s Camino Rojo mine in Zacatecas State, Mexico, will more than double the company’s annual production to over 300,000 ounces, with the expected near term growth to over 500,000 ounces annually as the South Railroad project in Nevada is expected to start production in 2027. The transaction is also expected to significantly enhance Orla’s free cash flow, providing additional cash for the company’s organic growth plans.

Orla shares advanced on the news, rising 6.8% or 38 cents to $5.93. The shares trade in a 52-week range of $7.16 and $3.53.

Musselwhite is a producing underground gold mine located on the shore of Opapimiskan Lake in northwestern Ontario. It has been in operation for 25 years, having produced close to 6.0 million ounces of gold to date, with a long history of resource growth and expansion.

At the end of 2023, proven and probable gold reserves stood at 1.5 million ounces (7.4 million tonnes at grade 6.23 g/t) within a measured and indicated resource of 1.8 million ounces (9.52 million tonnes at 5.78 g/t).

The cash consideration will be funded through a combination of cash, existing undrawn debt capacity, new indebtedness, a gold pre-pay facility and convertible notes led by Orla’s cornerstone investors. There is no equity dilution associated with the transaction.

Orla currently operates the Camino Rojo oxide gold mine, a gold and silver open-pit and heap leach mine. The company is also developing the South Railroad project, a feasibility stage, open pit, heap leach gold project. The project is located on the company’s 25,000-hectare South Carlin Complex in Nevada, which contains several mineral resources and exploration targets.

Prior to Monday’s announcement, the company said it expected to produce between 120,000 and 130,000 ounces of gold this year, up from a previous target of between 100,000 and 110,000 ounces.

The acquisition of Musselwhite transforms Orla into a North American-centred, geographically diversified gold producer with multiple producing assets and self-funded growth portfolio.