Orla Mining (TSX: OLA) is set to transform from a single asset producer to that of a mid-tier producer, with the firm this morning announcing the acquisition of the Musselwhite Gold Mine from Newmont Corp (TSX: NGT).
The transaction will see Orla pay $810 million in up front consideration, along with $40 million in gold-price linked contingent consideration for the asset. Payment is to be made in the form of cash, and will be funded by current cash reserves, existing undrawn debt capacity, new indebtedness, a gold pre-pay facility and convertible notes, which are to be led by existing investors of the company.
The Musselwhite Gold Mine, found in Ontario, is a long life mine that has produced over 6.0 million ounces of gold to date. The mine, based on a technical reported commissioned by Orla, is estimated to have seven years of remaining mine life based on current reserves, with average annual gold production of 202,000. All in sustaining costs meanwhile are expected to be roughly $1,269 an ounce.
The mine is said to contain a net present value (5% discount) of $760 million at $2,150 an ounce gold, which climbs to $1.0 billion at $2,500 an ounce gold.
Current proven and probable reserves total 1.5 million ounces, with an additional 1.8 million measured and indicated ounces, and 0.19 million inferred gold ounces.
“This acquisition is a significant milestone for Orla Mining. It more than doubles our annual production, while providing us with a presence in Ontario, Canada, one of the premier mining jurisdictions in the world and where I began my career. We intend to not only continue to operate Musselwhite, but to seek optimization opportunities and to invest in its future, grow its reserves and resources, and extend its mine life. The mine has a proven history of successful production, cash generation, and reserve replacement, having consistently added to mine life,” commented Orla CEO Jason Simpson.
On a pro forma basis, Orla is expected to have annual production in excess of 300,000 ounces of gold, at an all in sustaining cost an at estimated $1,080 per ounce. Orla also says it has a path towards annual production of 500,000 ounces, once its South Railroad project in Nevada comes online in 2027.
The purchase will be funded via a combination of facilities, including:
- $10 million from existing cash on hand.
- $100 million from a term loan from a syndicate of lenders including Scotiabank, Bank of Montreal, CIBC, and ING Capital, with a three year maturity.
- $150 million from an existing revolving credit facility, due August 2027.
- $200 million via new senior unsecured notes, led by Fairfax, Pierre Lassonde, and Trinity Capital Partners. The notes are due in 2029, bear interest at 4.5% per annum, convert at $7.90 per share, and contain warrants at $11.90 per share.
- $350 million via a gold prepayment facility from a syndicate of lenders. Approximately 150,000 ounces are expected to be delivered over three years to repay the facility, representing 16% of consolidation production.
The gold price linked contingent consideration meanwhile will see Orla pay an additional $20 million should the price of gold exceed $2,900 per ounce for the initial one-year period following the closing of the purchase. An additional $20 million is to be paid should gold exceed $3,000 an ounce.
The purchase is slated to close in the first quarter of 2025.
Orla Mining last traded at $5.55 on the TSX.
Information for this briefing was found via Sedar and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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