Exhibit 99.1
Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
Presented in United States dollars
ORLA MINING LTD.
Condensed Interim Consolidated Balance Sheets
(Unaudited - thousands of United States dollars)
As at | March 31, 2023 | December 31, 2022 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 83,809 | $ | 96,278 | ||||
Trade and other receivables | 357 | 365 | ||||||
Value added taxes recoverable (note 10) | 8,529 | 8,659 | ||||||
Inventory (note 9) | 24,878 | 22,446 | ||||||
Prepaid expenses | 3,677 | 2,824 | ||||||
Restricted cash | — | 2,290 | ||||||
121,250 | 132,862 | |||||||
Restricted cash | 1,148 | 1,142 | ||||||
Value added taxes recoverable (note 10) | 5,033 | 5,229 | ||||||
Long-term inventory (note 9) | 4,807 | 4,096 | ||||||
Property, plant and equipment (note 11) | 219,370 | 224,416 | ||||||
Exploration and evaluation properties (note 12) | 242,743 | 242,743 | ||||||
Deferred tax asset | 2,708 | 2,405 | ||||||
Other non-current assets | 1,052 | 923 | ||||||
TOTAL ASSETS | $ | 598,111 | $ | 613,816 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Trade payables and accrued liabilities (note 13) | $ | 14,917 | $ | 19,675 | ||||
Current portion of long term debt (note 14) | 45,000 | 45,000 | ||||||
Taxes payable | 10,173 | 33,102 | ||||||
70,090 | 97,777 | |||||||
Lease obligations (note 17) | 2,234 | 2,327 | ||||||
Long term debt (note 14) | 95,390 | 100,795 | ||||||
Deferred revenue | 7,809 | 7,500 | ||||||
Site closure provisions (note 18) | 7,895 | 8,261 | ||||||
Other long term liabilities | 209 | 172 | ||||||
TOTAL LIABILITIES | 183,627 | 216,832 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Share capital (note 19) | 449,647 | 445,316 | ||||||
Reserves | 23,882 | 24,009 | ||||||
Accumulated other comprehensive income | (1,522 | ) | (1,583 | ) | ||||
Accumulated deficit | (57,523 | ) | (70,758 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY | 414,484 | 396,984 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 598,111 | $ | 613,816 |
/s/ Jason Simpson | /s/ Elizabeth McGregor | |
Jason Simpson, Director | Elizabeth McGregor, Director |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 2-*
ORLA MINING LTD.
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Unaudited - thousands of United States dollars)
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
REVENUE (note 4) | $ | 51,131 | $ | 39,645 | ||||
COST OF SALES | ||||||||
Operating costs (note 5(a)) | (11,792 | ) | (9,366 | ) | ||||
Depletion and depreciation (note 5(c)) | (5,854 | ) | — | |||||
Royalties (note 5(b)) | (1,306 | ) | (1,064 | ) | ||||
(18,952 | ) | (10,430 | ) | |||||
EARNINGS FROM MINING OPERATIONS | 32,179 | 29,215 | ||||||
EXPLORATION AND EVALUATION EXPENSES (note 6) | (6,866 | ) | (2,466 | ) | ||||
GENERAL AND ADMINISTRATIVE EXPENSES (note 7) | (3,265 | ) | (2,943 | ) | ||||
OTHER | ||||||||
Interest income | 1,131 | 168 | ||||||
Depreciation | (118 | ) | (36 | ) | ||||
Share based payments (note 21) | (1,107 | ) | (865 | ) | ||||
Interest and accretion expense (note 8) | (3,247 | ) | (493 | ) | ||||
Foreign exchange and other gain (loss) | (802 | ) | (1,363 | ) | ||||
(4,143 | ) | (2,589 | ) | |||||
INCOME BEFORE TAXES | 17,905 | 21,217 | ||||||
Income taxes (note 28) | (4,670 | ) | (2,435 | ) | ||||
INCOME FOR THE PERIOD | $ | 13,235 | $ | 18,782 | ||||
OTHER COMPREHENSIVE INCOME | ||||||||
Items that may in future periods be reclassified to profit or loss: | ||||||||
Foreign currency differences arising on translation | 61 | 1,063 | ||||||
TOTAL COMPREHENSIVE INCOME | $ | 13,296 | $ | 19,845 | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (note 20) | ||||||||
Basic (millions) | 306.3 | 247.8 | ||||||
Diluted (millions) | 325.6 | 274.4 | ||||||
EARNINGS PER SHARE (note 20) | ||||||||
Basic | $ | 0.04 | $ | 0.08 | ||||
Diluted | $ | 0.04 | $ | 0.07 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 3
ORLA MINING LTD.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited - thousands of United States dollars)
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
OPERATING ACTIVITIES | ||||||||
Income for the period | $ | 13,235 | $ | 18,782 | ||||
Adjustments for: | ||||||||
Interest and accretion expense (note 8) | 3,247 | 493 | ||||||
Income tax expense | 4,670 | 2,435 | ||||||
Income taxes paid | (26,529 | ) | (244 | ) | ||||
Payment of cash settled RSUs and DSUs | (466 | ) | (1,723 | ) | ||||
Adjustments for items not affecting cash: | ||||||||
Depreciation and depletion | 5,972 | 375 | ||||||
Share based payments (note 21) | 1,107 | 865 | ||||||
Unrealized foreign exchange loss (gain) | (1,803 | ) | 1,013 | |||||
Other | 519 | 22 | ||||||
Cash provided by (used in) operating activities before changes in non-cash working capital | (48 | ) | 22,018 | |||||
Accounts receivable and prepaid expenses | (855 | ) | (3,840 | ) | ||||
Inventory | (2,416 | ) | (1,808 | ) | ||||
Valued added taxes | 1,283 | — | ||||||
Trade payables and accrued liabilities | (2,886 | ) | 4,123 | |||||
Cash provided by (used in) operating activities | (4,922 | ) | 20,493 | |||||
INVESTING ACTIVITIES | ||||||||
Purchase of plant and equipment | (1,159 | ) | (928 | ) | ||||
Deposits and other payments on long term assets | (128 | ) | — | |||||
Mineral properties and related construction | (1,589 | ) | (5,643 | ) | ||||
Restricted cash and environmental bonding | 2,284 | (40 | ) | |||||
Value added taxes received | — | 2,460 | ||||||
Cash used in investing activities | (592 | ) | (4,151 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Principal repayments of the Credit Facility (note 15) | (5,550 | ) | — | |||||
Proceeds from exercise of stock options and warrants | 2,968 | 1,377 | ||||||
Interest paid | (4,294 | ) | (3,237 | ) | ||||
Lease payments | (162 | ) | (132 | ) | ||||
Cash provided by used in financing activities | (7,038 | ) | (1,992 | ) | ||||
Effects of exchange rate changes on cash | 83 | 172 | ||||||
Net increase (decrease) in cash | (12,469 | ) | 14,522 | |||||
Cash, beginning of period | 96,278 | 20,516 | ||||||
CASH, END OF PERIOD | $ | 83,809 | $ | 35,038 | ||||
Supplemental cash flow information (note 23) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 4
ORLA MINING LTD.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited - thousands of United States dollars)
Common shares | Reserves | |||||||||||||||||||||||||||||||
Number of shares (thousands) | Amount | Share based payments reserve | Warrants reserve | Total | Accumulated Other Comprehensive Income (loss) | Accumulated deficit | Total | |||||||||||||||||||||||||
Balance at January 1, 2022 | 247,600 | $ | 269,198 | $ | 10,051 | $ | 19,255 | $ | 29,306 | $ | 2,441 | $ | (116,528 | ) | $ | 184,417 | ||||||||||||||||
Warrants exercised (note 19) | 295 | 675 | — | (82 | ) | (82 | ) | — | — | 593 | ||||||||||||||||||||||
Options exercised (note 21) | 723 | 1,523 | (739 | ) | — | (739 | ) | — | — | 784 | ||||||||||||||||||||||
RSUs redeemed (note 21) | 36 | 138 | (138 | ) | — | (138 | ) | — | — | — | ||||||||||||||||||||||
RSUs settled in cash (note 21) | — | (1,320 | ) | (403 | ) | — | (403 | ) | — | — | (1,723 | ) | ||||||||||||||||||||
Share based payments (note 21) | — | — | 865 | — | 865 | — | — | 865 | ||||||||||||||||||||||||
Income for the period | — | — | — | — | — | — | 18,782 | 18,782 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 1,063 | — | 1,063 | ||||||||||||||||||||||||
Balance at March 31, 2022 | 248,654 | $ | 270,214 | $ | 9,636 | $ | 19,173 | $ | 28,809 | $ | 3,504 | $ | (97,746 | ) | $ | 204,781 | ||||||||||||||||
Balance at January 1, 2023 | 305,809 | $ | 445,316 | $ | 9,897 | $ | 14,112 | $ | 24,009 | $ | (1,583 | ) | $ | (70,758 | ) | $ | 396,984 | |||||||||||||||
Shares issued for property payments | 61 | 242 | — | — | — | — | — | 242 | ||||||||||||||||||||||||
Warrants exercised (note 19) | 557 | 1,377 | — | (148 | ) | (148 | ) | — | — | 1,229 | ||||||||||||||||||||||
Options exercised (note 21) | 1,465 | 2,494 | (755 | ) | — | (755 | ) | — | — | 1,739 | ||||||||||||||||||||||
RSUs redeemed (note 21) | 55 | 218 | (218 | ) | — | (218 | ) | — | — | — | ||||||||||||||||||||||
Share based payments (note 21) | — | — | 994 | — | 994 | — | — | 994 | ||||||||||||||||||||||||
Income for the period | — | — | — | — | — | — | 13,235 | 13,235 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 61 | — | 61 | ||||||||||||||||||||||||
Balance at March 31, 2023 | 307,947 | $ | 449,647 | $ | 9,918 | $ | 13,964 | $ | 23,882 | $ | (1,522 | ) | $ | (57,523 | ) | $ | 414,484 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 5
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
1. | CORPORATE INFORMATION AND NATURE OF OPERATIONS |
Orla Mining Ltd. was incorporated in Alberta in 2007 and was continued into British Columbia in 2010 and subsequently into Ontario under the Business Corporations Act (Ontario) in 2014. In 2016, the Company was continued as a federal company under the Canada Business Corporations Act. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries. The registered office of the Company is located at Suite 1010, 1075 West Georgia Street, Vancouver, Canada.
The Company is engaged in the acquisition, exploration, development, and exploitation of mineral properties, and holds the Camino Rojo gold and silver mine in Zacatecas State, Mexico, Cerro Quema gold project in Panama, and the South Railroad and Lewis gold projects in Nevada, USA.
These condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company declared commercial production at Camino Rojo, effective April 1, 2022.
2. | BASIS OF PREPARATION |
(a) | Statement of compliance and basis of presentation |
These condensed interim consolidated financial statements have been prepared in accordance with IAS 34 «Interim Financial Reporting» and do not include all the information required for full annual financial statements.
The preparation of these condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
These condensed interim consolidated financial statements are presented in United States dollars and include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated upon consolidation.
On May 11, 2023, the Board of Directors approved these condensed interim consolidated financial statements for issuance.
3. | SIGNIFICANT ACCOUNTING POLICIES |
These condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as at and for the years ended December 31, 2022 and 2021.
We applied the same accounting policies in these condensed interim consolidated financial statements as those applied in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2022, except as noted herein. In preparing these condensed interim consolidated financial statements, the significant judgements we made in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the year ended December 31, 2022.
Page 6
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
4. | REVENUE |
Camino Rojo was under commissioning during the three months ended March 31, 2022. The Company declared commercial production at Camino Rojo, effective April 1, 2022.
Revenue by significant product type:
Three months ended March 31 | ||||||||
2023 | 2022 (note 29) | |||||||
Gold | $ | 50,707 | $ | 39,426 | ||||
Silver | 424 | 219 | ||||||
Revenue | $ | 51,131 | $ | 39,645 | ||||
Customer A | $ | 11,788 | $ | 39,645 | ||||
Customer B | 36,594 | — | ||||||
Others | 2,749 | — | ||||||
Revenue | $ | 51,131 | $ | 39,645 |
5. | COST OF SALES |
Camino Rojo was under construction during the three months ended March 31, 2022. The Company declared commercial production at Camino Rojo effective April 1, 2022. Consequently, no depletion or Extraordinary Mining Duty was recorded prior to April 1, 2022.
(a) | Operating costs |
Three months ended March 31 | ||||||||
2023 | 2022 (note 29) | |||||||
Mining and processing costs | $ | 11,623 | $ | 9,126 | ||||
Refining and transportation costs | 169 | 240 | ||||||
$ | 11,792 | $ | 9,366 |
Page 7
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Royalties |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Camino Rojo Oxide 2% NSR royalty (note 11) | $ | 1,009 | $ | 1,064 | ||||
Mexican 0.5% Extraordinary Mining Duty | 297 | — | ||||||
$ | 1,306 | $ | 1,064 |
(c) | Depletion and depreciation |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Depletion of producing mineral property | $ | 2,771 | $ | — | ||||
Depreciation of plant and equipment | 3,083 | — | ||||||
Depletion and depreciation | $ | 5,854 | $ | — |
6. | EXPLORATION AND EVALUATION EXPENSES |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Camino Rojo | $ | 1,687 | $ | 1,505 | ||||
Cerro Quema | 2,644 | 727 | ||||||
Nevada projects (South Railroad, Lewis and Monitor Gold) | 2,418 | 83 | ||||||
Other | 117 | 151 | ||||||
$ | 6,866 | $ | 2,466 |
Page 8
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
7. | GENERAL AND ADMINISTRATIVE EXPENSES |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Office and administrative | $ | 710 | $ | 633 | ||||
Professional fees | 397 | 450 | ||||||
Regulatory and transfer agent | 286 | 198 | ||||||
Salaries and benefits | 1,872 | 1,662 | ||||||
$ | 3,265 | $ | 2,943 |
8. | INTEREST AND ACCRETION EXPENSE |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Interest (note 8(a)) | $ | 2,957 | $ | 14 | ||||
Accretion (note 8(b)) | 290 | 479 | ||||||
Interest and accretion expense | $ | 3,247 | $ | 493 |
(a) | Interest expense |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Credit Facility (note 15) | $ | 2,268 | — | |||||
Fresnillo obligation (note 16) | 285 | — | ||||||
Interest expense on leases (note 17) | 41 | 13 | ||||||
Deferred revenue | 309 | — | ||||||
Other | 54 | 1 | ||||||
$ | 2,957 | $ | 14 |
The Company declared commercial production at Camino Rojo effective April 1, 2022. Borrowing costs prior to that date were capitalized. Consequently, they do not appear in interest expense.
Page 9
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Accretion expense |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Newmont loan | $ | — | $ | 366 | ||||
Credit Facility (note 15) | 146 | — | ||||||
Accretion of site closure provisions | 144 | 113 | ||||||
$ | 290 | $ | 479 |
9. | INVENTORY |
March 31, 2023 | December 31, 2022 | |||||||
Current | ||||||||
Stockpiled ore | $ | 1,282 | $ | 1,869 | ||||
In-process inventory | 19,138 | 15,961 | ||||||
Finished goods inventory | 797 | 1,406 | ||||||
Materials and supplies | 3,661 | 3,210 | ||||||
Inventory – current | $ | 24,878 | $ | 22,446 | ||||
Long term | ||||||||
Stockpiled ore | $ | 4,807 | $ | 4,096 |
Long term inventory consists of stockpiled ore that is not expected to be processed within 12 months.
Included within inventory at March 31, 2023 is $7.2 million of depreciation (December 31, 2022 — $6.3 million).
10. | VALUE ADDED TAXES RECOVERABLE |
March 31, 2023 | December 31, 2022 | |||||||
Current portion | $ | 8,529 | $ | 8,659 | ||||
Long term portion | 5,033 | 5,229 | ||||||
$ | 13,562 | $ | 13,888 |
Value added taxes (“IVA”) paid in Mexico are fully recoverable. However, IVA recovery returns in Mexico are subject to complex filing requirements and detailed audit or review by the fiscal authorities. Consequently, the timing of receipt of refunds is uncertain. We have used judgement in classifying the current and non-current portions of our Mexican VAT receivables. Factors that we considered include (i) the regularity of payments received, (ii) discussions with and communications from the Mexican tax authorities with respect to specific claims, and (iii) the expected length of time for refunds in accordance with Mexico’s regulations.
Page 10
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Of the long term portion, approximately $4.7 million (December 31, 2022 — $4.4 million) is under dispute with the taxation authorities.
11. | PROPERTY, PLANT AND EQUIPMENT |
Our operating property is the Camino Rojo Oxide Gold Mine in Mexico and constitute substantially all our buildings, and machinery and equipment. Other assets and other right of use assets include assets located at other locations.
Producing mineral property | Buildings | Machinery and equipment | Other assets | Other right of use assets | Total | |||||||||||||||||||
Cost | ||||||||||||||||||||||||
At December 31, 2021 | — | 66 | 5,238 | 1,261 | 2,119 | 8,684 | ||||||||||||||||||
Additions | 6,616 | 1,788 | 3,272 | 666 | 2,300 | 14,642 | ||||||||||||||||||
Transfer from construction | 127,002 | 58,869 | 36,684 | 608 | — | 223,163 | ||||||||||||||||||
Reclassification of capitalized interest | (19,020 | ) | 11,585 | 7,341 | 94 | — | — | |||||||||||||||||
Change in site closure provision (note 18) | 1,155 | (300 | ) | (190 | ) | — | — | 665 | ||||||||||||||||
Leased assets derecognized at end of lease | — | — | — | — | (215 | ) | (215 | ) | ||||||||||||||||
Due to changes in exchange rates | — | — | — | (9 | ) | (44 | ) | (53 | ) | |||||||||||||||
At December 31, 2022 | $ | 115,753 | $ | 72,008 | $ | 52,345 | $ | 2,620 | $ | 4,160 | $ | 246,886 | ||||||||||||
Additions | 1,589 | 372 | 522 | 265 | — | 2,748 | ||||||||||||||||||
Change in site closure provision (note 18) | (241 | ) | (523 | ) | (331 | ) | — | — | (1,095 | ) | ||||||||||||||
Due to changes in exchange rates | — | — | — | 1 | — | 1 | ||||||||||||||||||
At March 31, 2023 | $ | 117,101 | $ | 71,857 | $ | 52,536 | $ | 2,886 | $ | 4,160 | $ | 248,540 | ||||||||||||
Accumulated depreciation | ||||||||||||||||||||||||
At December 31, 2021 | — | 6 | 350 | 288 | 405 | 1,049 | ||||||||||||||||||
Depletion and depreciation | 9,641 | 6,280 | 4,541 | 421 | 764 | 21,647 | ||||||||||||||||||
Leased assets derecognized at end of lease | — | — | — | — | (215 | ) | (215 | ) | ||||||||||||||||
Due to changes in exchange rates | — | — | — | (4 | ) | (7 | ) | (11 | ) | |||||||||||||||
At December 31, 2022 | $ | 9,641 | $ | 6,286 | $ | 4,891 | $ | 705 | $ | 947 | $ | 22,470 | ||||||||||||
Depletion and depreciation | 3,110 | 1,867 | 1,305 | 160 | 258 | 6,700 | ||||||||||||||||||
At March 31, 2023 | $ | 12,751 | $ | 8,153 | $ | 6,196 | $ | 865 | $ | 1,205 | $ | 29,170 | ||||||||||||
Net book value | ||||||||||||||||||||||||
At December 31, 2022 | $ | 106,112 | $ | 65,722 | $ | 47,454 | $ | 1,915 | $ | 3,213 | $ | 224,416 | ||||||||||||
At March 31, 2023 | $ | 104,350 | $ | 63,704 | $ | 46,340 | $ | 2,021 | $ | 2,955 | $ | 219,370 |
Page 11
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
12. | EXPLORATION AND EVALUATION PROPERTIES |
Our exploration and evaluation properties consist of the Cerro Quema Project in Panama and the Nevada projects (South Railroad, Lewis and Monitor Gold projects in Nevada, United States).
Acquisition costs | Nevada projects | Cerro Quema | Total | |||||||||
As at March 31, 2023 and December 31, 2022 | $ | 160,314 | $ | 82,429 | $ | 242,743 |
13. | TRADE PAYABLES AND ACCRUED LIABILITIES |
March 31, 2023 | December 31, 2022 | |||||||
Trade payables | $ | 2,756 | $ | 6,707 | ||||
Goods or services received awaiting vendor invoices | 5,172 | 3,139 | ||||||
Payroll related | 3,853 | 3,380 | ||||||
Royalties payable | 1,295 | 2,119 | ||||||
Current portion of lease obligations (note 17) | 878 | 846 | ||||||
Accrued interest on Credit Facility (note 15) | 26 | 1,660 | ||||||
Restricted share units expected to be cash settled (note 21(b)) | — | 352 | ||||||
Other | 937 | 1,472 | ||||||
$ | 14,917 | $ | 19,675 |
Page 12
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
14. | LONG TERM DEBT |
March 31, 2023 | ||||||||||||
Current | Long term | Total | ||||||||||
Credit Facility (note 15) | $ | 22,200 | $ | 95,390 | $ | 117,590 | ||||||
Fresnillo obligation (note 16) | 22,800 | — | 22,800 | |||||||||
$ | 45,000 | $ | 95,390 | $ | 140,390 |
December 31, 2022 | ||||||||||||
Current | Long term | Total | ||||||||||
Credit Facility (note 15) | $ | 22,200 | $ | 100,795 | $ | 122,995 | ||||||
Fresnillo obligation (note 16) | 22,800 | — | 22,800 | |||||||||
$ | 45,000 | $ | 100,795 | $ | 145,795 |
15. | CREDIT FACILITY |
On April 28, 2022, the Company entered into a Credit Facility consisting of a $100 million term facility and a $50 million revolving facility through a syndicate of lenders composed of The Bank of Nova Scotia, Bank of Montreal, and Canadian Imperial Bank of Commerce. The Credit Facility is secured by the Company’s present and future assets, property and all proceeds thereof other than present and future assets owned by Cerro Quema, which is excluded from the collateral.
The Credit Facility consists of two parts:
1. | $100 million term facility with a five-year term, repayable in 18 equal quarterly instalments commencing December 31, 2022. |
2. | $50 million revolving facility, with the ability to increase to $75 million subject to certain conditions and customary consents. The revolving facility has a three-year term, with an option to extend the term of the revolving facility by up to one-year intervals subject to certain conditions and customary consents. Full repayment of the revolving facility is due upon maturity. |
The applicable interest rate for each Credit Facility is based on the term Secured Overnight Financing Rate (“SOFR”), plus an applicable margin ranging from 2.75% to 3.75% based on the Company’s leverage ratio at the end of each fiscal quarter. During the quarter ended March 31, 2023, the average interest rate paid on the outstanding Credit Facility was 7.4% per annum (three months ended March 31, 2022 – not applicable).
The undrawn portion of the revolving facility is subject to a standby fee ranging from 0.6875% to 0.9375%.
The Credit Facility is subject to certain covenants – refer to note 25(c) for details. The Company may prepay all or any portion of the amounts owed under the credit agreement without penalty.
Page 13
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Term facility | Revolving facility | Total | ||||||||||
At December 31, 2022 | $ | 93,338 | $ | 29,657 | $ | 122,995 | ||||||
Interest expense during the period | 1,721 | 547 | 2,268 | |||||||||
Accretion during the period | 114 | 32 | 146 | |||||||||
Interest paid during the period | (1,703 | ) | (541 | ) | (2,244 | ) | ||||||
Principal repayments during the period | (5,550 | ) | — | (5,550 | ) | |||||||
Reallocated to accrued interest payable | (19 | ) | (6 | ) | (25 | ) | ||||||
At March 31, 2023 | $ | 87,901 | $ | 29,689 | $ | 117,590 | ||||||
Current | 22,200 | — | 22,200 | |||||||||
Non-current | 65,701 | 29,689 | 95,390 | |||||||||
$ | 87,901 | $ | 29,689 | $ | 117,590 |
16. | FRESNILLO OBLIGATION |
Pursuant to the terms of the Layback Agreement, we agreed to pay Fresnillo total cash consideration of $62.8 million through the following staged payment schedule:
i. | $25.0 million upon closing of the transaction (paid); | |
ii. | $15.0 million on December 1, 2022 (paid); and | |
iii. | $22.8 million on December 1, 2023 |
The amounts payable bear interest at 5% per annum, payable quarterly. To March 31, 2022, we capitalized the interest on this loan to “Mineral properties and related construction”. On April 1, 2022, we commenced commercial production at the Camino Rojo Oxide Gold Mine and began to expense the interest on this obligation.
March 31, 2023 | December 31, 2022 | |||||||
Beginning of period | $ | 22,800 | $ | 37,800 | ||||
Interest capitalized during the period | — | 473 | ||||||
Interest expense during the period (note 8) | 285 | 1,383 | ||||||
Principal repaid | — | (15,000 | ) | |||||
Cash interest paid | (285 | ) | (1,856 | ) | ||||
End of period | $ | 22,800 | $ | 22,800 | ||||
Current | 22,800 | 22,800 | ||||||
Non-current | — | — | ||||||
$ | 22,800 | $ | 22,800 |
Page 14
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
17. | LEASE OBLIGATIONS |
The Company has lease contracts for mining equipment, vehicles and buildings. Leases of mining equipment have lease terms of five years, while vehicles and buildings generally have lease terms between three and five years.
(a) | Lease obligations |
March 31, 2023 | December 31, 2022 | |||||||
Beginning of year | $ | 3,173 | $ | 1,401 | ||||
Additions | — | 2,300 | ||||||
Interest expense | 41 | 87 | ||||||
Lease payments | (203 | ) | (661 | ) | ||||
Due to changes in exchange rates | 101 | 46 | ||||||
End of period | $ | 3,112 | $ | 3,173 | ||||
Current | $ | 878 | $ | 846 | ||||
Non-current | 2,234 | 2,327 | ||||||
$ | 3,112 | $ | 3,173 |
(b) | Lease expenses recognized |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Interest on lease liabilities | $ | 41 | $ | 13 | ||||
Variable lease payments not included in the measurement of lease liabilities | 3,403 | 2,872 | ||||||
Expenses relating to short-term leases | 69 | 6 | ||||||
Expenses relating to leases of low-value assets, excluding short-term leases | 33 | 27 | ||||||
$ | 3,546 | $ | 2,918 |
Page 15
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
18. | SITE CLOSURE PROVISIONS |
Camino Rojo | Cerro Quema Project | Nevada projects | Total | |||||||||||||
At December 31, 2021 | $ | 5,117 | $ | 343 | $ | — | $ | 5,460 | ||||||||
Acquisition of Gold Standard | — | — | 1,603 | 1,603 | ||||||||||||
Changes in cost estimates | 351 | — | — | 351 | ||||||||||||
Change in estimated cash flows resulting from current activities | 427 | — | — | 427 | ||||||||||||
Remediation activities conducted during the period | (88 | ) | — | — | (88 | ) | ||||||||||
Accretion during the period (note 8) | 494 | — | 14 | 508 | ||||||||||||
At December 31, 2022 | 6,301 | 343 | 1,617 | 8,261 | ||||||||||||
Changes in cost estimates | (1,095 | ) | — | 281 | (814 | ) | ||||||||||
Change in estimated cash flows resulting from current activities | 304 | — | — | 304 | ||||||||||||
Accretion during the period (note 8) | 140 | — | 4 | 144 | ||||||||||||
At March 31, 2023 | $ | 5,650 | $ | 343 | $ | 1,902 | $ | 7,895 | ||||||||
Current | $ | — | $ | — | $ | — | $ | — | ||||||||
Non-current | 5,650 | 343 | 1,902 | 7,895 | ||||||||||||
$ | 5,650 | $ | 343 | $ | 1,902 | $ | 7,895 |
Camino Rojo | Cerro Quema Project | Nevada projects | ||||||||||
Estimated settlement dates | 2033 to 2047 | 2034 | ||||||||||
Undiscounted risk-adjusted cash flows | $ | 9,345 | $ | 343 | $ | 2,102 | ||||||
Inflation rate | 5.3 | % | — | 2.5 | % | |||||||
Discount rate | 9.5 | % | — | 3.4 | % |
19. | SHARE CAPITAL |
(a) | Authorized share capital |
The Company’s authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.
Page 16
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Warrants |
The following summarizes information about the number of warrants outstanding during the period.
Expiry date | Exercise price | December 31, 2022 | Exercised | Expired | March 31, 2023 | |||||||||||||||
December 18, 2026 | C$ | 3.00 | 29,545,000 | (556,500 | ) | — | 28,988,500 | |||||||||||||
Weighted average exercise price | C$ | 3.00 | C$ | 3.00 | C$ | — | C$ | 3.00 |
Subsequent to the reporting period, the Company issued 287,300 common shares for proceeds of C$861,900 ($640,000) pursuant to the exercise of warrants.
20. | EARNINGS PER SHARE |
Earnings (loss) per share has been calculated using the weighted average number of common shares outstanding for the three months ended March 31, 2023 and 2022 as follows:
(a) | Basic |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Income for the period | $ | 13,235 | $ | 18,782 | ||||
Weighted average number of common shares (thousands) | 306,305 | 247,762 | ||||||
Basic earnings per share | $ | 0.04 | $ | 0.08 |
Page 17
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Diluted |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Income for the period | $ | 13,235 | $ | 18,782 | ||||
Weighted average number of common shares (thousands) | 306,305 | 247,762 | ||||||
Weighted average shares dilution adjustments: | ||||||||
Warrants | 14,076 | 18,665 | ||||||
Options | 3,842 | 6,214 | ||||||
RSUs | 357 | 593 | ||||||
DSUs | 565 | 712 | ||||||
Bonus shares | 500 | 500 | ||||||
Weighted average number of ordinary shares | 325,645 | 274,446 | ||||||
Diluted earnings per share | $ | 0.04 | $ | 0.07 |
21. | SHARE-BASED PAYMENTS |
The Company has five different forms of share-based payments for eligible recipients – stock options, restricted share units (“RSUs”), deferred share units (“DSUs”), performance share units (“PSUs”), and bonus shares. The bonus shares have fully vested but have not yet been issued.
Three months ended March 31 | ||||||||
Share-based payments expense | 2023 | 2022 | ||||||
Stock options (note 21(a)) | $ | 356 | $ | 399 | ||||
Restricted share units (note 21(b)) | 276 | 193 | ||||||
Deferred share units (note 21(c)) | 475 | 273 | ||||||
Share based payments expense | $ | 1,107 | $ | 865 |
(a) | Stock options |
Stock options granted by the Company prior to 2022 typically had a five-year life, with one third each vesting on grant date, and one year and two years after grant date. Commencing in 2022, stock options granted by the Company have a five-year life, with one third each vesting one, two, and three years after grant date.
Stock options of Gold Standard Ventures Inc. (“Gold Standard”) that were outstanding at the acquisition date of August 12, 2022 were exchanged for options to acquire common shares of Orla (“Replacement Options”), resulting in the issuance of 1,758,334 Replacement Options, which are exercisable until their original expiry dates. For those individuals who did not continue on with Orla, the expiry date is capped at August 12, 2024.
Page 18
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Three months ended March 31 | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Stock options outstanding | Number | Weighted average exercise price | Number | Weighted average exercise price | ||||||||||||
Outstanding, January 1 | 9,178,889 | C$ | 3.71 | 9,900,874 | C$ | 1.86 | ||||||||||
Granted | 445,988 | 6.58 | 924,080 | 5.81 | ||||||||||||
Exercised | (1,464,553 | ) | 1.61 | (722,500 | ) | 1.37 | ||||||||||
Expired, forfeited or cancelled | (162,270 | ) | 17.02 | — | — | |||||||||||
Outstanding, March 31 | 7,998,054 | C$ | 3.98 | 10,102,454 | C$ | 2.26 | ||||||||||
Vested, March 31 | 6,601,044 | C$ | 3.60 | 8,602,252 | C$ | 1.78 |
The stock options granted during the three months ended March 31, 2023 had a grant date fair value of C$1.4 million ($1.0 million) using the following weighted average assumptions:
• | Share price at grant date – C$6.58, expected volatility 50%, expected life - 5 years, risk free interest rate 3.0% and expected dividends – nil. |
Subsequent to the reporting period, 608,109 stock options were exercised, for gross proceeds to the Company of C$840,000 ($622,000).
(b) | Restricted Share Units |
Restricted Share Units (“RSU’s) awarded by the Company typically vest one-third each one, two, and three years after award date.
Three months ended March 31 | ||||||
Number of RSUs outstanding: | 2023 | 2022 | ||||
Outstanding, January 1 | 443,267 | 707,840 | ||||
Awarded | 283,032 | 172,301 | ||||
Vested and settled | (149,651 | ) | (402,430 | ) | ||
Forfeitures during the period | — | — | ||||
Outstanding, March 31 | 576,648 | 477,711 |
Number vesting in the year | ||||||||||||||||||||||||
Number of RSUs outstanding: | Total | 2022 | 2023 | 2024 | 2025 | 2026 | ||||||||||||||||||
Outstanding, March 31, 2022 | 477,711 | 41,865 | 242,610 | 135,798 | 57,438 | — | ||||||||||||||||||
Outstanding, March 31, 2023 | 576,648 | N/A | 2,552 | 331,679 | 148,061 | 94,356 |
Page 19
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Restricted Share Units (“RSUs”) are valued based on the closing price of the Company’s common shares on the trading day immediately prior to award. Certain RSUs may be settled in cash at the option of the Company.
During the three months ended March 31, 2023, the Company elected to settle 94,063 RSUs in cash for $0.5 million (three months ended March 31, 2022 — 365,935 RSUs cash-settled for $1.7 million).
(c) | Deferred Share Units |
Deferred Share Units (“DSUs”) are awarded by the Company to directors. These DSUs vest immediately but are not settled until the end of the director’s tenure. They may be settled in cash or common shares at the option of the Company. DSUs are valued using the closing price of the Company’s common shares immediately prior to award.
Three months ended March 31 | ||||||
Number of DSUs outstanding: | 2023 | 2022 | ||||
Outstanding, January 1 | 559,725 | 707,028 | ||||
Awarded and vested immediately | 98,781 | 57,692 | ||||
Outstanding, March 31 | 658,506 | 764,720 | ||||
Vested, March 31 | 658,506 | 764,720 |
(d) | Performance share units |
In March 2023, the Board of Directors approved a performance share unit (“PSUs”) plan for certain officers of the Company. The PSUs cliff vest after three years and are settled in cash. The cash payment upon vesting will be based on the number of PSUs, multiplied by the five-day volume weighted average price of the Company’s shares upon vesting, which is then multiplied by a “performance percentage”. The performance percentage ranges from 0% to 200% based on the Company’s total shareholder return compared to a peer group, consisting of the constituents of the S&P/TSX Global Gold Index.
We recognize share-based compensation expense related to these PSUs over the vesting period. We adjust the amount recognized at each reporting period to reflect changes in quoted market values of the Company and the peer group, the lapsed portion of the vesting period, the number of PSUs expected to vest, and the expected performance percentage.
On March 27, 2023, the Company issued a total of 198,737 PSUs with an estimated aggregate grant date fair value of $1.27 million. To March 31, 2023, no share based compensation was recognized in respect of these PSUs as the amount was negligible.
Page 20
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
Three months ended March 31 | ||||||||
Number of PSUs outstanding: | 2023 | 2022 | ||||||
Outstanding, January 1 | — | — | ||||||
Granted during the period | 198,737 | — | ||||||
Outstanding, March 31 | 198,737 | — | ||||||
Vested, March 31 | — | — |
(e) | Bonus shares |
During 2017, the Board of Directors awarded 500,000 common shares to the non-executive Chairman of the Company as bonus shares. The bonus shares were subject to a vesting period from June 19, 2017, to June 18, 2020 (the “Eligibility Period”). The bonus shares will become issuable (1) when the non-executive Chairman ceases to act as a director of the Company, or (2) upon a change of control of the Company.
Number of bonus shares outstanding: | March 31, 2023 | December 31, 2022 | ||||||
Outstanding | 500,000 | 500,000 | ||||||
Vested | 500,000 | 500,000 |
22. | RELATED PARTY TRANSACTIONS |
The Company’s related parties include:
Related party | Nature of the relationship | |
Key management personnel | Key management personnel are the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, Chief Sustainability Officer, the Senior Vice President Exploration, and members of the Board of Directors of the Company. |
Page 21
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(a) | Key Management Personnel |
Compensation to key management personnel was as follows:
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Salaries and short term incentives paid | $ | 2,284 | $ | 1,531 | ||||
Directors’ fees | 83 | 79 | ||||||
Share based payments | 923 | 745 | ||||||
$ | 3,290 | $ | 2,355 |
(b) | Transactions |
The Company had no other material transactions with related parties other than key management personnel during the three months ended March 31, 2023, and 2022.
(c) | Outstanding balances at the Reporting Date |
At March 31, 2023, estimated accrued short term incentive compensation totaled $0.3 million and is included in accrued liabilities (December 31, 2022 – $1.1 million).
23. | SUPPLEMENTAL CASH FLOW INFORMATION |
(a) | Cash and cash equivalents |
Cash and cash equivalents consists of bank current accounts and cash on hand.
Page 22
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Non-cash investing and financing activities |
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Financing activities | ||||||||
Stock options exercised, credited to share capital with an offset to reserves | $ | 755 | $ | 739 | ||||
Warrants exercised, credited to share capital with an offset to reserves | 148 | 82 | ||||||
Common shares issued on maturity of RSUs, credited to share capital with an offset to reserves | 218 | 541 | ||||||
Investing activities | ||||||||
Marketable securities adjustment included in account receivable with an offset to other gains | 4 | 3 | ||||||
Initial recognition of right of use assets with an offset to lease obligation | — | 187 |
24. | SEGMENT INFORMATION |
(a) | Reportable segments |
The operating and reportable segments of the Company are based on the reports which are reviewed by the chief operating decision maker (“CODM”) in making strategic resource allocation decisions. These operating segments are (1) the Mexican project, (2) the Panamanian project, (3) the Nevada projects and (4) the corporate office. The operating segments other than corporate office are each managed by a dedicated General Manager and management team. The corporate office oversees the plans and activities of early stage exploration projects.
Page 23
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Geographic segments |
We conduct our activities in four geographic areas: Mexico, Panama, Nevada USA, and Canada (Corporate).
(i) | Income (loss) for the period by segment |
Mexico | Panama | Nevada | Corporate | Total | ||||||||||||||||
Three months ended March 31, 2023 | ||||||||||||||||||||
Revenue (note 4) | $ | 50,939 | $ | — | $ | — | $ | 192 | $ | 51,131 | ||||||||||
Cost of sales | (18,873 | ) | — | — | (79 | ) | (18,952 | ) | ||||||||||||
Earnings from mining operations | 32,066 | — | — | 113 | 32,179 | |||||||||||||||
Exploration and evaluation expenses (note 6) | (1,675 | ) | (2,654 | ) | (2,418 | ) | (119 | ) | (6,866 | ) | ||||||||||
General and administrative expenses (note 7) | — | — | — | (3,265 | ) | (3,265 | ) | |||||||||||||
Depreciation | (14 | ) | (4 | ) | (31 | ) | (69 | ) | (118 | ) | ||||||||||
Share based payments (note 21) | (41 | ) | (18 | ) | (47 | ) | (1,001 | ) | (1,107 | ) | ||||||||||
Interest income | 930 | — | — | 201 | 1,131 | |||||||||||||||
Interest and accretion expense | (441 | ) | — | (338 | ) | (2,468 | ) | (3,247 | ) | |||||||||||
Foreign exchange and other gain (loss) | (705 | ) | — | (97 | ) | (802 | ) | |||||||||||||
Income taxes | (4,239 | ) | — | — | (431 | ) | (4,670 | ) | ||||||||||||
Income (loss) for the period | $ | 25,881 | $ | (2,676 | ) | $ | (2,834 | ) | $ | (7,136 | ) | $ | 13,235 |
Mexico | Panama | USA | Corporate | Total | ||||||||||||||||
Three months ended March 31, 2022 | ||||||||||||||||||||
Revenue (note 4) | $ | 39,645 | $ | — | $ | — | $ | — | $ | 39,645 | ||||||||||
Cost of sales | (10,430 | ) | — | — | — | (10,430 | ) | |||||||||||||
Earnings from mining operations | 29,215 | — | — | — | 29,215 | |||||||||||||||
Exploration and evaluation expenses (note 6) | (1,505 | ) | (727 | ) | (83 | ) | (151 | ) | (2,466 | ) | ||||||||||
General and administrative expenses (note 7) | — | — | — | (2,943 | ) | (2,943 | ) | |||||||||||||
Depreciation | (1 | ) | (3 | ) | — | (32 | ) | (36 | ) | |||||||||||
Share based payments (note 21) | (20 | ) | (13 | ) | — | (832 | ) | (865 | ) | |||||||||||
Interest and finance costs | (340 | ) | — | — | 15 | (325 | ) | |||||||||||||
Foreign exchange and other gain (loss) | (555 | ) | — | — | (808 | ) | (1,363 | ) | ||||||||||||
Current income taxes | (2,191 | ) | — | — | (244 | ) | (2,435 | ) | ||||||||||||
Income (loss) for the period | $ | 24,603 | $ | (743 | ) | $ | (83 | ) | $ | (4,995 | ) | $ | 18,782 |
Page 24
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(ii) | Assets by segment |
Mexico | Panama | Nevada | Corporate | Total | ||||||||||||||||
At March 31, 2023 | ||||||||||||||||||||
Property, plant and equipment | $ | 217,791 | $ | 35 | $ | 560 | $ | 984 | $ | 219,370 | ||||||||||
Exploration and evaluation properties | — | 82,429 | 160,314 | — | 242,743 | |||||||||||||||
Total assets | 332,828 | 83,484 | 163,155 | 18,644 | 598,111 |
Mexico | Panama | Nevada | Corporate | Total | ||||||||||||||||
At December 31, 2022 | ||||||||||||||||||||
Property, plant and equipment | $ | 222,767 | $ | 39 | $ | 577 | $ | 1,033 | $ | 224,416 | ||||||||||
Exploration and evaluation properties | — | 82,429 | 160,314 | — | 242,743 | |||||||||||||||
Total assets | 348,390 | 83,291 | 163,857 | 18,278 | 613,816 |
25. | CAPITAL MANAGEMENT |
(a) | Objectives |
Our objectives when managing capital are to safeguard the Company’s ability to continue as a going concern to pursue the exploration, evaluation, development, and exploitation of our mineral properties and to maintain a flexible capital structure.
We manage our capital structure and adjust it considering changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the Company’s capital structure, we may issue new shares, take on additional debt or repay outstanding debt, or acquire or dispose of assets. We currently do not pay regular dividends.
Our ability to carry out our long-range strategic objectives in future periods depends on our ability to generate positive cash flows from our mining operations and to raise financing from lenders, shareholders, and new investors. We regularly review and consider financing alternatives to fund the Company’s ongoing operational, exploration and development activities.
(b) | Investment policy |
Our investment policy is to invest the Company’s excess cash in low-risk financial instruments such as demand deposits and savings accounts with major Canadian banks. By using this strategy, the Company preserves its cash resources and can marginally increase these resources with low risk through the yields on these investments. Our financial instruments are exposed to certain financial risks, which include currency risk, credit risk, and liquidity risk.
Page 25
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(c) | Credit Facility |
On April 28, 2022, the Company entered into a Credit Facility which includes a $100 million term facility and a $50 million revolving facility pursuant to which we had drawn $30 million as of March 31, 2023. The agreement includes covenants customary for a facility of this nature, including compliance with customary restrictive covenants and financial covenants related to maintaining a leverage ratio at less than or equal to 3.00, an interest service coverage ratio at greater than or equal to 4, a tangible net worth greater than or equal to $151.6 million, and minimum liquidity in an amount greater than or equal to $15 million. The Company is prohibited from declaring, paying or setting aside for payment any dividends unless certain financial covenants and ratios are met.
As at March 31, 2023, the Company was in compliance with all covenants.
26. | FINANCIAL INSTRUMENTS |
(a) | Fair value hierarchy |
To provide an indication of the reliability of the inputs used in determining fair value, we classify our financial instruments into the three levels prescribed by the accounting standards.
Level 1 | The fair value of financial instruments traded in active markets (such as publicly traded equity securities) is based on quoted (unadjusted) market prices as at the reporting date. The quoted market price used for financial assets held by the Company is the closing trading price on the reporting date. Such instruments are included in Level 1. |
Level 2 | The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, we include that instrument in Level 2. |
Level 3 | If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. |
The carrying value of cash and cash equivalents, accounts receivable, restricted cash, trade payables and accrued liabilities approximates the fair value due to the short-term nature of the instruments. The fair value of the Credit Facility and Fresnillo obligation is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.
The fair value of the Credit Facility at March 31, 2023 was estimated at $118.9 million (December 31, 2022 – $124.5 million) using a discount rate of 7.8% (December 31, 2022 – 7.5%). The fair value of the Fresnillo obligation at March 31, 2023 was estimated at $22.4 million (December 31, 2022 – $22.3 million) using a discount rate of 7.8% (December 31, 2022 – 7.5%).
Page 26
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
At March 31, 2023, the carrying values and fair values of our financial instruments by category were as follows:
Fair value | ||||||||||||||||||||||||||
Classification | Carrying value | Level 1 | Level 2 | Level 3 | Short term nature | Total fair value | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||
Cash and cash equivalents | FVTPL | $ | 83,809 | $ | 83,809 | $ | — | $ | — | $ | — | $ | 83,809 | |||||||||||||
Accounts receivable | Amortized cost | 322 | 25 | — | — | 297 | 322 | |||||||||||||||||||
Restricted cash | Amortized cost | 1,148 | 1,148 | — | — | — | 1,148 | |||||||||||||||||||
$ | 85,279 | $ | 84,982 | $ | — | $ | — | $ | 297 | $ | 85,279 | |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||
Trade and other payables | Amortized cost | $ | 4,313 | $ | — | $ | — | $ | — | $ | 4,313 | $ | 4,313 | |||||||||||||
Accrued liabilities | Amortized cost | 7,069 | — | — | — | 7,069 | 7,069 | |||||||||||||||||||
Lease obligation | Amortized cost | 3,112 | — | 3,112 | — | — | 3,112 | |||||||||||||||||||
Credit facility | Amortized cost | 117,590 | — | — | 118,900 | — | 118,900 | |||||||||||||||||||
Fresnillo obligation | Amortized cost | 22,800 | — | — | 22,384 | — | 22,384 | |||||||||||||||||||
$ | 154,898 | $ | — | $ | 3,112 | $ | 141,284 | $ | 11,382 | $ | 155,778 |
At December 31, 2022, the carrying values and fair values of our financial instruments by category were as follows:
Fair value | ||||||||||||||||||||||||||
Classification | Carrying value | Quoted prices in active market for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Approximate fair value due to short term nature of the instrument | Total Fair Value | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||
Cash and cash equivalents | FVTPL | $ | 96,278 | $ | 96,278 | $ | — | $ | — | $ | — | $ | 96,278 | |||||||||||||
Accounts receivable | Amortized cost | 317 | 21 | — | — | 296 | 317 | |||||||||||||||||||
Restricted cash | Amortized cost | 3,432 | 3,432 | — | — | — | 3,432 | |||||||||||||||||||
$ | 100,027 | $ | 99,731 | $ | — | $ | — | $ | 296 | $ | 100,027 | |||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||
Trade and other payables | Amortized cost | $ | 8,851 | $ | — | $ | — | $ | — | $ | 8,851 | $ | 8,851 | |||||||||||||
Accrued liabilities | Amortized cost | 7,967 | 352 | — | — | 7,615 | 7,967 | |||||||||||||||||||
Lease obligation | Amortized cost | 3,173 | — | 3,173 | — | — | 3,173 | |||||||||||||||||||
Credit facility | Amortized cost | 122,995 | — | — | 124,450 | — | 124,450 | |||||||||||||||||||
Fresnillo obligation | Amortized cost | 22,800 | — | — | 22,296 | — | 22,296 | |||||||||||||||||||
$ | 165,786 | $ | 352 | $ | 3,173 | $ | 146,746 | $ | 16,466 | $ | 166,737 |
Our policy is to determine whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of the reporting period.
Page 27
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
27. | COMMITMENTS AND CONTINGENCIES |
(a) | Commitments |
The Company has issued purchase orders for construction, equipment purchases, materials and supplies, and other services at Camino Rojo. At March 31, 2023, these outstanding purchase orders and contracts totaled approximately $1.9 million (December 31, 2022 – $2.0 million), which we expect will be filled within the next 12 months.
The Company has a minimum commitment of $800,000 related to the South Railroad exploration and evaluation asset, which we expect will be filled within the next 24 months.
The Company is committed to making severance payments totalling approximately $6.1 million (December 31, 2022 – $3.7 million) to certain officers and management in the event of a change in control. As the likelihood of these events occurring is not determinable, this amount is not reflected in these consolidated financial statements.
We may, from time to time, be a party to legal proceedings, which arise in the ordinary course of our business. We are not aware of any pending or threatened litigation that, if resolved against us, would have a material effect on our consolidated financial position, results of operations or cash flows.
(b) | Discretionary mineral property-related commitments |
As is customary in mineral exploration, some of the mineral properties held by the Company as exploration and evaluation assets have annual minimum work commitments and lease payments required to maintain these properties in good standing pursuant to their underlying agreements.
28. | INCOME TAX EXPENSE |
Current income tax expense consists of three components - current income tax on taxable income, 7.5% special mining duty ("SMD") on income subject to SMD, and withholding taxes attributable to interest charged on intercompany loans to the Mexican operating company.
Three months ended March 31 | ||||||||
2023 | 2022 | |||||||
Current income tax expense | $ | 6,445 | $ | — | ||||
Mexican 7.5% Special Mining Duty | 2,714 | 2,191 | ||||||
Deferred income tax | (4,187 | ) | — | |||||
Deferred Mexican 7.5% Special Mining Duty expense | (733 | ) | — | |||||
Withholding taxes | 431 | 244 | ||||||
Tax expense | $ | 4,670 | $ | 2,435 |
Page 28
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
29. | RECLASSIFICATIONS OF PRIOR PERIOD FIGURES |
Certain of the prior period’s figures have been reclassified to conform to the presentation in the current period. These reclassifications were primarily the grouping and disaggregation of small balances.
(a) | Income statement |
Three months ended March 31, 2022 | ||||
Revenue | ||||
As previously presented | $ | 39,405 | ||
Refining and transportation reclassified to operating costs | 240 | |||
As currently presented | $ | 39,645 | ||
Operating costs | ||||
As previously presented | $ | 9,126 | ||
Refining and transportation reclassified from revenue | 240 | |||
As currently presented | $ | 9,366 | ||
As previously presented | ||||
Interest (income) and finance costs | $ | 325 | ||
As currently presented | ||||
Interest (income) | $ | (168 | ) | |
Interest and accretion expense | 493 | |||
$ | 325 | |||
Other gain (loss) | ||||
As previously presented | $ | (241 | ) | |
Withholding taxes reclassified to income taxes | 244 | |||
As currently presented | $ | 3 | ||
Income taxes | ||||
As previously presented | $ | 2,191 | ||
Withholding taxes reclassified from other gain (loss) | 244 | |||
As currently presented | $ | 2,435 |
Page 29
ORLA MINING LTD.
Notes to the Condensed Interim Consolidated Financial Statements
Three months ended March 31, 2023 and 2022
(United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)
(b) | Statement of cash flows |
Three months ended March 31, 2022 | ||||
Operating activities | ||||
Income tax expense – As previously presented | $ | — | ||
Income tax expense reclassified from non-cash working capital | 2,435 | |||
Income tax expense – As currently presented | $ | 2,435 | ||
Operating activities | ||||
Income taxes paid – As previously presented | $ | — | ||
Withholding taxes paid reclassified from non-cash working capital | (244 | ) | ||
Income taxes paid – As currently presented | $ | (244 | ) | |
Operating activities | ||||
Changes in non-cash working capital – As previously presented | $ | 666 | ||
Income tax expense shown separately | (2,435 | ) | ||
Withholding taxes paid reclassified to income taxes paid | 244 | |||
Changes in non-cash working capital – As currently presented | $ | (1,525 | ) |
30. | EVENTS AFTER THE REPORTING PERIOD |
(a) | Private placement |
Further to the Investor Rights Agreement between Agnico Eagle Mines Limited (“Agnico Eagle”) and the Company, Agnico Eagle partially exercised its top-up right and has subscribed for 3,987,241 common shares of the Company (the “Common Shares”) at a price of C$6.27 per Common Share, for proceeds of C$25 million (approximately $18,585,000) (the “Investment”) subsequent to the reporting period.
In accordance with the Investor Rights Agreement, Agnico Eagle’s top-up right was triggered as a result of its percentage ownership in the Company’s common shares being diluted by at least 1% due to the exercise or settlement of convertible securities of the Company.
(b) | Exercise of stock options and warrants |
Subsequent to the reporting period, the Company issued common shares pursuant to the exercise of stock options (note 21(a)) and warrants (note 19(b)).
Page 30