Perpetua Resources Corp. press release
Orla Mining Announces Strategic Expansion into Canada with Acquisition of the Musselwhite Gold Mine
NASDAQ - Nasdaq Stock Market · Gold · Antimony · Silver · United States
Canada NewsWire
_More than Doubles Orla's Annual Gold Production to Over 300 koz with Near-Term Growth to 500 koz; Orla to Become a Premier, North America-Focused, Multi-Asset, Low Cost, Producing Gold Company. _
VANCOUVER, BC , Nov. 18, 2024 /CNW/ - Orla Mining Ltd . (TSX: OLA) (NYSE: ORLA) (" Orla " or the " Company ") is pleased to announce it has entered into a definitive agreement (the " Agreement ") to acquire the Musselwhite Gold Mine (" Musselwhite ") in Ontario from Newmont Corporation (" Newmont ") for upfront cash consideration of $810 million and gold-price linked contingent consideration of $40 million (the " Transaction ") 1 .
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The cash consideration will be financed through a combination of cash, existing undrawn debt capacity, new indebtedness, a gold pre-pay facility, and convertible notes led by Orla's existing cornerstone investors. There is no upfront equity dilution associated with the Transaction.
The Transaction adds a second high quality, high margin producing asset to Orla's portfolio. The combination of the proven Musselwhite mine and Orla's low-cost Camino Rojo oxide operation more than doubles the Company's annual gold production to over 300 koz, with expected near-term growth to over 500 koz of annual gold production as the South Railroad Project is expected to commence production in 2027. The Transaction will also significantly enhance the free cash flow of the Company, providing additional cash for the execution of Orla's organic growth plans.
Transaction Highlights:
Strategic acquisition of a proven Canadian operating gold mine with a skilled underground workforce located in a tier-one mining jurisdiction.
Transforms Orla from a single asset producer to a multi asset intermediate producer.
Immediately more than doubles gold production with a clear path to 500 koz of annual gold production.
Musselwhite has robust reserves and resources as well as significant exploration potential.
Well suited to the technical capabilities of Orla's executive and operating teams.
Transaction funded through a mix of debt facilities, with significant support from cornerstone shareholders and no upfront equity dilution.
Materially accretive on all key operating and financial per-share metrics benefiting all existing shareholders.
Builds on Orla's established track record of development and operating success and is aligned with Orla's strategy for growth and value creation.
| | | 1 All amounts expressed in U.S. dollars unless otherwise stated |
Musselwhite Overview:
Musselwhite is a producing, underground gold mine located on the shore of Opapimiskan Lake in Northwestern Ontario . It has been in operation for over 25 years, having produced close to 6 million ounces of gold to date, with a long history of resource growth and conversion.
At December 31, 2023 , proven and probable gold reserves contained 1.5 million ounces (7.4 million tonnes at grade of 6.23 g/t Au) within a measured and indicated resource 2 of 1.8 million ounces (9.52 million tonnes at 5.78 g/t Au) and an inferred resource of 0.19 million ounces (1.2 million tonnes at 4.96 g/t Au).
Orla commissioned an independent NI 43-101 technical report for Musselwhite in connection with the Transaction. Based only on the current reserves, Musselwhite has a seven year mine life (2024-2030) with average annual gold production of 202 koz at $1,269 /oz all-in sustaining cost ("AISC") 3 .
The NPV5% at January 1, 2025 , of Musselwhite is estimated at $760 million using a flat $2,150 gold price and increases to approximately $1 billion using a flat $2,500 flat gold price. Significant opportunities exist to optimize the operation and extend mine life though known extensions of the ore body.
The Company intends to aggressively explore the 65,000-hectare concession, including following up on historical drilling that suggests 2 to 3 kilometers of mineralized strike potential beyond the current reserves.
Additionally, the CIP processing facility has a nameplate capacity of 1.5 Mtpa with only 1.0 Mtpa currently being utilized, which allows Orla the opportunity to fill excess mill capacity through new discoveries and increased mining rates.
"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.
We have been impressed with the operating team at Musselwhite, which runs an exceptional mine and has developed positive and strong ties with First Nations, local partners, and community members. We are fully committed to respecting and growing these relationships.
Thanks to our shareholders, notably Pierre Lassonde and Prem Watsa of Fairfax, and our banking and financial partners, for their continued support as we strive to elevate Orla into an even stronger and more robust mining company. We are also grateful to Newmont for their trust in our vision and commitment to sustainability. We intend to be responsible stewards of Musselwhite, creating a legacy of excellence, respect, and value for all stakeholders."
Jason Simpson , President & Chief Executive Officer of Orla
| | | 2 Inclusive of mineral reserves | | 3 Non-GAAP measure. Excludes exploration and project growth spending. Refer to the "Non-GAAP Measures" section of this news release. |
Transaction Rationale:
Acquisition of a high-quality, long-life, producing gold mine: Musselwhite is an established operation with nearly 6 Moz of gold produced over the past 28 years, 1.5 Moz of gold reserves with additional mineral resources, as well as identified upside potential supporting opportunities for significant mine life extension. The mineralization at Musselwhite is hosted in a banded iron formation (BIF) that remains open along a known strike extent, at least one kilometre beyond the current reserves. The total mining and exploration lease covers over 65,000 hectares.
Strategic entry into Canada establishing an enhanced North American presence: Strengthened portfolio diversification with entry into Ontario, Canada – a tier one mining jurisdiction. Located in a mining-friendly region with a strong work force and robust stakeholder support, the operation benefits from a stable operating environment that further enhances its long-term value. The combination of quality assets in Ontario, Canada , Nevada , United States , and Zacatecas, Mexico creates a premier North America focused gold company.
Immediately increases annual gold production by 140% to over 300 koz at competitive costs: Pro forma annual gold production of +300 koz at combined costs of $1,080 /oz 4 AISC. Through the development of South Railroad in Nevada , the Company has a pathway to annual production of 500 koz at industry leading costs.
No upfront equity dilution with significant support from cornerstone shareholders: Attractive transaction financing package including bank-provided debt and gold prepay financing, as well as a placement of convertible notes led by Fairfax Financial Holdings Limited (" Fairfax "), Pierre Lassonde , and Trinity Capital Partners Corporation, allows shareholders to retain exposure to Orla's increasing net asset value with no upfront equity dilution.
Accretive to key metrics: Transaction is expected to be significantly accretive to operating and free cash flow, gold production and gold reserves and resources, all on a per share basis.
Strengthened cash flow generation to support growth pipeline: Musselwhite is expected to generate over $150 million in average annual free cash flow over the next 6 years 5 . The combined cash flows of Camino Rojo and Musselwhite will allow the Company to self-fund continued investment in its growth pipeline. This includes Musselwhite's growth development, the South Railroad Project, development of the Camino Rojo sulphides project, and exploration in all three countries. The Company has a robust cash position of approximately $145 million as of November 17, 2024 .
Musselwhite is well suited to Orla's technical capabilities: Orla's experienced management team boasts in-depth experience developing and operating underground mines, including many in Canada , and is supplemented by the Board of Director's operating history with the asset.
Increased leverage to strong gold price environment: Production uplift from Musselwhite increases exposure to the current record gold price environment.
| _ | | 4 Based on combined 2024 guidance Orla (Midpoint of 130-140koz and "low end" of $800-900/oz AISC) and Musselwhite LOM averages as per the Technical Report (as defined below) (202 koz and $1,269/oz AISC). | | 5 See Production Schedule in Appendix. |
Benefits to Orla Shareholders:
Transforms Orla into a North America centred, geographically diversified gold producer with multiple producing assets and a self-funded growth portfolio.
Strengthens Orla's asset base and establishes a more robust mining company with strong gold production, competitive costs, cash flow generation, and a compelling pipeline with near- and medium-term growth opportunities.
Delivers immediate earnings and cash flow accretion on a per-share basis.
Transaction structure avoids upfront equity dilution to existing shareholders and takes advantage of the record gold price environment through the gold prepay arrangement.
Aligns with Orla's stated strategy for growth and value creation with net asset value per share to continue increasing as the Company executes its vision.
Musselwhite Stakeholders:
Orla values the skills and commitment of the Musselwhite team and will rely on them to continue to run the operation.
Orla will continue the highly constructive and collaborative relationship that has been developed with the local First Nations and will honour all existing commitments, obligations, and agreements with them.
All existing agreements with suppliers and contractors will be honoured.
The Company is committed to significantly investing in exploration and development activities to replace and grow mineral reserves and resources, with a clear focus on extending the mine life.
Orla will honour all existing charitable community commitments.
Orla is committed to building on the established Musselwhite stakeholder relationships and working together in a spirit of trust, collaboration, and transparency.
The Musselwhite Gold Mine:
Operational Overview
Musselwhite is a proven Canadian mining operation producing close to 6 Moz of gold since it began operating in 1997. It is a fly-in, fly-out underground mining operation located in northwestern Ontario, Canada , with mining taking place from two main zones via longitudinal retreat and transverse stoping, conveyed to surface via an internal winze and conveyor. Ore processing occurs via two-stage crushing, grinding, leach/cyanide-in-pulp (CIP), and final doré with annual throughput capacity of 1.5 Mtpa. Gold recovery rates have been approximately 96%.
The operation is well-run, and Orla will evaluate all continuous improvement initiatives to maximize the potential of the operation while studying the potential for growth.
Geology and Exploration
Musselwhite has a strong history of gold production, supported by consistent resource and reserve replenishment and growth, which have extended its operational life. Gold mineralization is primarily hosted within folded banded iron formations (BIF), characterized by close associations with pyrrhotite, quartz-carbonate veining, and quartz flooding.
Historical mining along the main mine trend demonstrated exceptional continuity and predictability of gold mineralization. Drilling by the previous operator (2018–2020) down plunge from the main mine trend confirmed that mineralization extends at least 8 km from surface and remains open at depth.
Orla's exploration strategy would aim to replenish reserves and grow resources through sustained exploration investment. Underground drilling will continue to target infill and extension in key zones, while surface directional drilling at the PQ Deeps extension will resume to confirm continuity along the deposit plunge. Orla will also outline a long-term plan to explore the broader mine lease area and regional claims, recognizing strong potential for additional BIF-hosted and orogenic gold mineralization.
Transaction Summary:
Under the terms of the Agreement, Orla will acquire all the outstanding shares of a wholly-owned subsidiary of Newmont that will own a 100% interest in Musselwhite.
Orla has agreed to pay Newmont $810 million in cash upon closing of the Transaction and up to $40 million in contingent consideration, payable as follows:
$20 million to be paid should the average spot gold price exceed $2,900 /oz for the initial one-year period following closing of the Transaction; and
$20 million to be paid should the average spot gold price exceed $3,000 /oz for the second full year period following closing of the Transaction.
As Newmont is a "related party" of Orla under the Canadian Securities Administrators' Multinational Instrument 61-101 – _Protection of Minority Security Holders in Special Transactions _(" MI 61-101 "), the Transaction will require majority approval of the shareholders of the Company, other than Newmont. It is anticipated that a special meeting of the Company's shareholders (the " Special Meeting ") called to consider and approve the Transaction will be held in January 2025 .
Closing of the Transaction is expected to occur promptly following the Special Meeting and is subject to other customary closing conditions and receipt of certain regulatory approvals.
Full details of the Transaction will be included in the management information circular and related documents (the " Meeting Materials ") and are expected to be delivered to the Company's shareholders in December 2024 in connection with the Special Meeting.
Transaction Structure and Financing:
The Transaction has been structured by Orla to take advantage of its strong balance sheet and financial flexibility and avoid any upfront equity dilution. The $810 million in upfront consideration will be funded from a combination of debt, gold prepayment new convertible notes, and cash on hand (collectively, the " Transaction Financing ") including:
$150 million available on the Company's existing revolving credit facility (the " RCF ") and a $100 million term loan (the " Term Loan " and together with the RCF, the " Credit Facility ") with a syndicate of lenders comprised of the Bank of Nova Scotia , Bank of Montreal , Canadian Imperial Bank of Commerce and ING Capital LLC;
$350 million gold prepayment (the " Gold Prepayment ") from a syndicate of lenders including Bank of Montreal , ING Capital Markets LLC, and Canadian Imperial Bank of Commerce;
$200 million in senior unsecured convertible notes (the " Convertible Notes ") led by the Company's cornerstone shareholders, Fairfax, Pierre Lassonde , and Trinity Capital Partners Corporation; and
$10 million from existing cash on hand of approximately $145 million as of November 17, 2024 .
Credit Facility
The Term Loan will have a three-year term with no principal payments during the first two quarters, following which the Term Loan will be repaid in quarterly installments of $5 million , with the balance repaid at maturity. The existing maturity date of August 2027 for the RCF will not change. Orla will have the ability to repay the Credit Facility in full, without penalties, at any time prior to the maturity date.
Interest, covenants and other terms of the Credit Facility will be substantially consistent with the Company's existing RCF. The interest rate will be based on the term Secured Overnight Financing Rate (SOFR), plus an applicable margin ranging from 2.50% to 3.75% based on the Company's leverage ratio at the end of each fiscal quarter, provided that for the first two quarters there will be a minimum margin of 3.0%.
The Credit Facility will be completed in connection with closing of the Transaction.
Gold Prepayment
The Company has binding commitments for a $350 million Gold Prepayment from a syndicate of lenders comprised of Bank of Montreal , ING Capital Markets LLC, and Canadian Imperial Bank of Commerce. Under the Gold Prepayment, the Company will have the obligation to deliver a set number of gold ounces over a three-year term in exchange for $350 million in cash upfront. Based on current pricing, approximately 150,000 ounces would be expected to be delivered over the three years subsequent to closing, representing approximately 16% of consolidated gold production. The Gold Prepayment will be completed in connection with the closing of the Transaction and the terms of the Gold Prepayment will be determined at the time of execution.
Private Placement of Convertible Notes
In connection with the Transaction, Orla has entered into a commitment letter with Fairfax, Pierre Lassonde , and Trinity Capital Partners Corporation for a non-brokered private placement of Convertible Notes in an aggregate principal amount of $200 million (the " Private Placement "). The Convertible Notes will have the following terms:
Interest Rate: 4.5% per annum, payable in cash.
Maturity: Five years from the date of issuance.
Conversion Right: The Convertible Notes may be converted in full or in part at any time prior to the maturity date, by the holder thereof, into common shares (the " Shares ") of Orla.
Conversion Price: The initial conversion price for the Convertible Notes will be CAD$7.90 per Share (the " Conversion Price "). The Conversion Price represents a premium of 42% relative to closing price of Shares on Friday November 15, 2024 and will be subject to standard anti-dilution adjustments.
Redemption Right: After the 18-month anniversary of the issuance, the Company may redeem the Convertible Notes, provided that the 20-day volume weighted average price of the Shares is not less than 130% of the Conversion Price. Upon redemption, the Convertible Notes will convert into Shares at the Conversion Price.
Warrants: On closing, each holder of the Convertible Notes will receive, for each Share issuable upon conversion thereof, 0.66 common share purchase warrants (the "Warrants" ) to acquire Shares. The Warrants shall have an exercise price of CAD$11.50 per Share and shall expire on the fifth anniversary of the closing of the Private Placement.
The Private Placement is expected to close concurrently with and is conditional on the closing of the Transaction. The Private Placement is also subject to approval of the Toronto Stock Exchange (" TSX ") and NYSE American. Under the rules of the TSX, as the Private Placement will result in more than 10% of the issued and outstanding Shares being made issuable to "insiders" of the Company (as defined by the TSX) and create the potential for Fairfax to become a control person of the Company, the Private Placement will also be subject to approval by shareholders of the Company, excluding insiders participating in the Private Placement. Such approval will be sought at the Special Meeting along with the Transaction.
The Convertible Notes and Warrants will be subject to a four month and one day hold period pursuant to securities laws in Canada . The Convertible Notes and Warrants have not been and will not be registered under the U.S. Securities Act of 1933, as amended, or any applicable securities laws of any state of the United States and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities of the Company, nor shall there be any offer or sale of any securities of the Company in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.