Golden Goose Resources Corp. press release

Orla Mining Increases Gold Mineral Reserves by 54% With Updated Feasibility Study at the Camino Rojo Oxide Gold Project

2021-01-11

CSE - Canadian National Stock Exchange · Gold · Lithium · Silver · Copper · Canada

Canada NewsWire

VANCOUVER, BC , Jan. 11, 2021 /CNW/ - Orla Mining Ltd. (TSX: OLA) (NYSE: ORLA) ("Orla" or the "Company") is pleased to provide the results of an updated Feasibility Study and mineral reserve estimate on its Camino Rojo Oxide Gold Project (the "Project" or "Camino Rojo") located in Zacatecas, Mexico . The updated Feasibility Study highlights a 54% increase in contained gold mineral reserves and a 3.5-year extension to the mine life of the Project, which is currently in construction. The estimated Project after-tax net present value ("NPV") (5% discount rate) is now $452 million with an after-tax internal rate of return ("IRR") of 62% at a gold price of $1,600 per ounce.

"The updated Feasibility Study for the Camino Rojo Oxide Project demonstrates an increase in recovered gold, mine life, and cash flows," stated Jason Simpson , President and Chief Executive Officer of Orla. "An already excellent project has been improved due to the hard work of the entire Orla team and I thank them for their efforts. We are pleased to announce this important enhancement and we will continue to optimize this asset as we move through construction and into production."

Key Updated Feasibility Study Highlights:

| Table 1: Feasibility Study Highlights | | | | | | | Units | Values | | | | Throughput Rate per Day | tonnes | 18,000 | | | | Total Ore to Leach Pad | M tonnes | 67.4 | | | | Gold Grade (Average) | g/t | 0.73 | | | | Silver Grade (Average) | g/t | 14.5 | | | | Contained Gold | ounces | 1,588,000 | | | | Contained Silver | ounces | 31,506,000 | | | | Average Gold Recovery | % | 62% | | | | Average Silver Recovery | % | 20% | | | | Recovered Gold | ounces | 980,000 | | | | Recovered Silver | ounces | 6,189,000 | | | | Mine Life | years | 10.4 | | | | Average Annual Gold Production | ounces | 94,000 | | | | Strip Ratio | waste : ore | 0.92 | | | | Initial Capex | US$ million | $134 | | | | Avg. Life of Mine Operating costs | $/t ore processed | $8.17 | | | | Total Cash Cost (net of by-product credits) 1 | $/oz Au | $490 | | | | All-In Sustaining Cost ("AISC") 1 | $/oz Au | $543 | | | | Pre -Tax - NPV (5% discount rate) | US$ million | $668 | | | | Pre-Tax IRR | % | 82% | | | | After-Tax - NPV (5% discount rate) | US$ million | $452 | | | | After-Tax IRR | % | 62% | | | | Payback | years | 1.5 | | | | | | | | |

| 1 Total cash cost and AISC are non-GAAP measures and are net of silver credits and includes royalties payable. See reference below regarding non-GAAP measures. | | * All dollar amounts in US dollars |

The updated Feasibility Study reflects some of the benefits resulting from a pit expansion made possible through the completion of the layback agreement with Fresnillo Plc ("Fresnillo") announced on December 21, 2020 (the "Layback Agreement"). Closing of the Layback Agreement is subject to receipt of Mexican antitrust approval from the Federal Competition Commission (Comisión Federal de Competencia Económica or "COFECE").

The Layback Agreement allows 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 outlined in the previous feasibility study dated June 25, 2019 ("2019 Feasibility Study"). 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. There has been no change to the mineral resource estimate dated effective June 7, 2019 .

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 open pit. 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 program 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 open pit 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 open pit, heap leach pad, and mine waste dump as a result of the Layback Agreement, all of which were anticipated in the initial design. The majority of the infrastructure will remain as presented in the 2019 Feasibility Study and as being currently constructed.

The updated Feasibility Study was conducted using a gold price of $1,600 per ounce and a silver price of $20 per ounce and is expressed in U.S. dollars.

The new mineral reserve estimate at Camino Rojo includes proven and probable mineral reserves of 67.4 million tonnes at a gold grade of 0.73 grams per tonne ("g/t") and a silver grade of 14.5 g/t, for total mineral reserves of 1.59 million ounces of gold and 31.5 million ounces of silver. All mineral reserves are contained within Orla's mineral concession. Approximately two-thirds of the mineral reserves are within the currently permitted mine plan. The remaining portion will require a Cambio de Uso de Suelo ("CUS") and related permit amendments for an expanded pit; approval of the Layback Agreement from COFECE and subsequent transfer of surface rights. These permit amendments and approvals are expected to be received in a reasonable time frame.

Measured and indicated mineral resources are unchanged at 353.4 million tonnes at 0.83 g/t gold and 8.8 g/t silver, resulting in an estimated 9.46 million ounces of gold and 100.4 million ounces of silver. Inferred mineral resources are 60.9 million tonnes at 0.87 g/t gold and 7.4 g/t silver, resulting in an estimated 1.70 million ounces of gold and 14.5 million ounces of silver. Mineral resources are inclusive of mineral reserves.

Further details on the mineral resource and mineral reserve estimates are provided below.

Camino Rojo Updated Feasibility Study

The Camino Rojo updated Feasibility Study considers open pit mining of 67.4 million tonnes of oxide and transitional ore at a rate of 18,000 tonnes per day. Ore from the pit will be crushed to 80% passing 28 mm, conveyor stacked onto a heap leach pad and leached using a low concentration sodium cyanide solution. Pregnant solution from the heap leach will be processed in a Merrill-Crowe recovery plant where gold and silver will be precipitated and doré will be produced. The site's proximity to infrastructure, low stripping ratio, compact footprint, and flat pad location all contribute to the Project's simplicity and low estimated AISC of $543 per ounce of gold.

The updated Feasibility Study was prepared by a team of independent industry experts led by Kappes Cassiday and Associates ("KCA") and supported by Independent Mining Consultants ("IMC"), Resource Geosciences Incorporated ("RGI"), John Ward Groundwater Consultant, Barranca Group LLC, Piteau Associates Engineering Ltd. and HydroGeoLogica Inc ("HGL").

The updated Feasibility Study incorporates geological, assay, engineering, metallurgical, geotechnical, environmental, and hydrogeological information collected by Orla and previous owners since 2007, including 370,566 metres of drilling in 911 holes. Predicted average gold recoveries of 62% are based on results from 85 column tests.

Operating costs are based on contract mining with all other mine components being owned and operated by Orla. Approximately 58% of capital costs are based on purchase orders and updated firm proposals for equipment, material, and construction contracts from ongoing EPCM and site activities. For capital items not yet purchased, budgetary supplier quotes were used.

Table 2 presents the key assumptions and detailed results of the updated Feasibility Study:

| | | 1 Total cash cost and AISC are non-GAAP measures and are net of silver credits and includes royalties payable. See reference below regarding non-GAAP measures. Updated Feasibility Study economics include a 2% net smelter royalty ("NSR") and assumes a USD:MXN exchange rate of 19.3. | | 2 Includes sunk capital costs to date |

The proposed mine is located three kilometres from a paved four-lane highway and approximately 190 kilometres from the city of Zacatecas . The area is flat and there are no known social or environmental impediments to mining at this time. There are no residents within the area of development. The town of San Tiburcio is located four kilometres to the east of the development. Orla has a Collaboration and Social Responsibility Agreement with Ejido San Tiburcio and a 30-year temporary occupation right with an expropriation right over the 2,497 hectares covering the portion of the proposed pit that is on the Orla concession and the location of all infrastructure. Subject to receipt of approval from COFECE and subsequent transfer of surface rights, the Layback Agreement provides reasonable expectation that all surface and mineral rights required to develop the Project as described in the updated Feasibility Study will be secured. Orla has sufficient water concessions and existing wells produce in-excess of the average 24 litres per second of water required for the Project.

The key permits and requirements for mining and exploration activities in Mexico are the Manifesto de Impacto Ambiental ("MIA") and the CUS, supported by an Estudio Tecnico Justificativo. Orla received the CUS in December 2019 and the MIA in August 2020 for the project constrained by the Orla concession boundary that is described in the 2019 Feasibility Study. Permit amendments will be required for the larger project described in the updated Feasibility Study, including the expanded pit and the eventual increase in the heap leach and mine waste dump. There are no impediments to construction, mining, and processing activities on the Orla concession while these permit modifications are in the application process.

Orla has an active community and social program in San Tiburcio and other nearby communities of El Berrendo and San Francisco de los Quijano.

Sensitivity to Gold Price

| Table 3: Project Economics Sensitivities to Gold Price | | | | | | | Gold Price ($/oz) | $1,250 | $1,425 | $1,600 | $1,775 | $1,950 | | After-tax NPV 5% ($M) | $288 | $370 | $452 | $534 | $616 | | After-tax IRR (%) | 44% | 53% | 62% | 70% | 78% | | Payback (years) | 2.0 | 1.7 | 1.5 | 1.3 | 1.2 |

Opportunities

In the updated Feasibility Study, all material mined on the Fresnillo concession is currently classified as waste. The Layback Agreement will provide Orla the right to mine and recover gold from heap leachable material located on the Fresnillo concession within the expanded pit. Further work is required to bring mineralized material on the Fresnillo concession into the measured and indicated mineral resource categories so that it can be included in an updated mine plan and mineral reserve estimate. While the overall open pit will be limited by the Layback Agreement and will not increase in size, any material from the Fresnillo concession located within the layback area that can be economically processed will improve overall Project economics.

The updated Feasibility Study only considers oxide and transitional material as testing shows that the heap leaching method cannot economically recover gold from the sulphide material. Orla is actively working on studies to investigate economic opportunities that may exist within the 7.3 million ounces of gold contained within the sulphide measured and indicated mineral resource peripheral to and below the oxides.

Orla has title to mineral concessions covering a large area around the Camino Rojo deposit. While overburden can make exploration challenging, the discovery in 2007 of mineralization that is incorporated within the updated Feasibility Study and mineral resource estimate demonstrates that shallow cover can hide very large near-surface deposits. Additional oxide material in the vicinity of the planned development would leverage the mine infrastructure outlined in the updated Feasibility Study. Any additional sulphide material could add to the long-term potential of the property.

Capital and Operating Costs

Initial capital expenditures or pre-production capital 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. Total capital for the life of the Project, including sustaining and working capital is estimated at $167 million . Table 4 provides a breakdown of the capital costs for the Project. All costs related to Project development, including those already spent as of the date of this Feasibility Study, are included in the total initial capital costs.

The total capital cost estimate excludes payments to Fresnillo as part of the Layback Agreement as they are considered property purchase payments. Pursuant to the Layback Agreement, an aggregate US$62.8 million is payable to Fresnillo through a staged payment schedule.

| Table 4: Capital Cost Summary (excl. value added tax) | | | Description | Cost (US$ '000s) | | Pre-Production Capital Costs | $91,552 | | Indirect Costs | $2,181 | | Other Owner's Costs | $15,904 | | EPCM | $8,020 | | Contingency | $13,822 | | Mining Contractor Mobilization & Preproduction | $2,577 | | Total Initial Capital | $134,056 | | Working Capital & Initial Fills | $9,845 | | Sustaining Capital – Mine & Process | $23,565 | | Total LOM Capital (incl. working capital) | $167,467 | | Closure Costs | $28,581 |

In the 2019 Feasibility Study, Project economics assumed a two-year construction period and all cash flows were discounted to year -2. However, Orla has already begun construction activities and committed $78 million in total capital and the Company estimates that there is approximately one year remaining until first production, placing the Project within year -1 of the life of mine plan. In the updated Feasibility Study, NPV is discounted to year -1 and those costs already expended are included but not discounted. This provides the most reasonable and accurate estimate of the Project NPV and IRR based on the date of the study within the context of the life of mine plan.

The average life of mine operating cost for the Project is estimated at $8.17 per tonne of ore processed. Operating costs were estimated from first principles with Project specific staffing, quoted contract mining costs, unit consumptions of materials, supplies, power, water, and delivered supply costs being considered.

Table 5 summarizes the different components of the operating costs:

| Table 5: Life of Mine Operating Cost Summary | | | | | Description | LOM Costs | LOM Costs | | | $/t | $/oz | | | | Mining | $3.37 | $232 | | | Process | $3.20 | $220 | | | G&A | $1.60 | $110 | | | Total Operating Costs | $8.17 | $562 | | | Refining & Transport | — | $9 | | | Royalties | — | $43 | | | By-product Credits | — | -$124 | | | Total Cash Costs (net of by products) 1 | — | $490 | | | Sustaining Capital | — | $24 | | | Reclamation | — | $29 | | | AISC 1 | — | $543 | | | | | | |

| 1 Total cash cost and AISC are non-GAAP measures and are net of silver credits and includes royalties payable. See reference below regarding non-GAAP measures. |

The estimated capital and operating costs are considered to have an accuracy of +/-15%.

Camino Rojo Oxide Project Construction Update

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, 2020 and since that time, 230 hectares have been cleared for construction activities with over 20,000 cubic metres of topsoil being removed and stockpiled. A total of 3,703 plants have been rescued as part of flora and fauna relocation. The 44-kilometre, 33-kV power line is 49% complete. Equipment deliveries to site commenced in December 2020 . A total of $78 million of the total Project capital has been committed through purchase orders and contracts. The mining contract is being finalized and expected to be in place early in the first quarter of 2021.

First gold production is planned for late 2021.

Next Steps

Orla will begin working on a Change of Land Use permit amendment for the expanded pit and other permitting requirements for the increased tonnes planned to be mined as a result of the Layback Agreement.

Additional work is required to bring material on the Fresnillo concession to the measured and indicated mineral resource category which will then facilitate a mineral reserve update. Work required includes an estimated 2,500 metres of drilling, detailed QA/QC, and integration of Orla's geological and resource models with Fresnillo's drill data.

Mineral Reserves

Camino Rojo comprises intrusive related, sedimentary strata hosted, polymetallic gold, silver, arsenic, zinc, and lead mineralization. The mineralized zones correspond to zones of sheeted sulphidic veins and veinlet networks, creating a bulk-mineable style of gold mineralization. Mineralization is almost completely oxidized to a depth of approximately 120 metres and then variably oxidized below (transitional to sulphide). The mineral resource estimate was divided into oxide, high and low transitional and sulphide material. Only the oxide and transitional material are considered in the updated Feasibility Study for heap leach extraction.

The mineral reserve estimate for Camino Rojo is based on an open pit mine plan and mine production schedule developed by IMC. All mineral reserves are located on Orla's concessions. A portion of the waste mining will be conducted on land controlled by Fresnillo as per the Layback Agreement between Fresnillo and Orla.