An updated feasibility study and mineral reserve estimate of TSX- and NYSE-listed Orla Mining’s Camino Rojo oxide gold project has increased its contained gold mineral reserves by 54% and added 3.5 years to the mine life.
The currently under construction project, located in Zacatecas, Mexico, now has an estimated project after-tax net present value, at a 5% discount rate, of $452-million with an after-tax internal rate of return of 62%, which is calculated at a gold price of $1 600/oz.
Orla president and CEO Jason Simpson says the updated feasibility study demonstrates an increase in recovered gold, mine life and cash flows. “An already excellent project has been improved due to the hard work of the entire Orla team and I thank them for their efforts.”
The updated feasibility study reflects some of the benefits resulting from a pit expansion made possible through the completion of the layback agreement with precious metals miner Fresnillo announced on December 21, 2020.
The layback agreement permits Orla to expand the north wall of the oxide pit onto the Fresnillo property immediately adjacent to Orla’s mineral concession. This expansion will increase oxide ore available for extraction on Orla’s property below the pit.
The increase in mineral reserves in the updated feasibility study is derived from the conversion of measured and indicated mineral resources located solely on Orla’s concession.
The layback agreement also provides Orla with the right to mine from Fresnillo’s mineral concession, and recover for Orla’s account, all oxide and transitional material amenable to heap leaching that is within an expanded openpit.
To date, results from holes drilled on Fresnillo’s concession in close proximity to the most northern holes on the Orla property appear to be consistent with projections of the geological and oxidation models created from Orla’s data and assay results. Additional work is required to bring material on the Fresnillo concession to the measured and indicated mineral resource categories.
Therefore, in the updated feasibility study, all material to be mined on the Fresnillo concession is classified as waste. Upon the completion of a confirmatory drill programme on Fresnillo’s concession by Orla, and integration of Fresnillo’s drill database, a subsequent mineral reserve update is expected which would include all economic oxide and transitional material from the expanded pit.
The updated feasibility study continues to support a technically simple openpit mine and heap leach operation, but improves upon the economics outlined in the 2019 feasibility study. The main notable physical changes from the 2019 feasibility study are an increase in the size of the openpit, heap leach pad, and mine waste dump as a result of the layback agreement, all of which were anticipated in the initial design.
CAPITAL AND OPERATING COSTS
Initial capital expenditure for the Camino Rojo project is estimated at $134-million. Camino Rojo benefits from flat terrain and simple infrastructure, limiting the amount of earthworks required during construction. As such, total capital for the life of the project is estimated at $167-million.
In the 2019 feasibility study, project economics assumed a two-year construction period and all cash flows were discounted to year two. However, Orla has already begun construction activities and committed $78-million in total capital and the company estimates that there is about one year remaining until first production, placing the project within year one of the life-of-mine plan.
To date, detailed engineering of the project described in the 2019 feasibility study is over 90% complete and procurement is 85% complete. The start of earthworks was announced on November 26, and since that time, 230 ha has been cleared for construction activities with over 20 000 m3 of topsoil being removed and stockpiled.
Further, the 44-km-long, 33 kV power line is 49% complete.
A total of $78-million of the total project capital has been committed through purchase orders and contracts, and equipment deliveries to site commenced in December 2020. The mining contract is being finalised and expected to be in place early in the first quarter of 2021. As such, Orla expects first gold production in late 2021.