UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 40-F

 

☒ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

 

or

 


☐ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

 

For the fiscal year ended _______________

Commission File Number ______________

 

  

ORLA MINING LTD.

(Exact name of Registrant as specified in its charter)

 

Canada     1040     N/A
(Province or other jurisdiction of
incorporation or organization)
    (Primary Standard Industrial
Classification Code Number)
    (I.R.S. Employer
Identification Number)

 

Suite 202, 595 Howe Street
Vancouver, British Columbia, V6C 2T5, Canada

(604) 564-1852

(Address and telephone number of Registrant’s principal executive offices)

 

C T Corporation System

28 Liberty Street

New York, New York 10005

(212) 894-8940

(Name, address (including zip code) and telephone number (including area code) of agent for service in the United States)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange
on which registered
Common Shares, no par value   ORLA   NYSE American

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

 

For annual reports, indicate by check mark the information filed with this Form:

 

¨ Annual information form        ¨ Audited annual financial statements

 

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: N/A

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ¨ YES    x NO

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ¨ YES      ¨ NO

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act. 

Emerging growth company  x

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ¨

 

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

 

 

 

 

 

EXPLANATORY NOTE

 

Orla Mining Ltd. (the “Company”) is a Canadian public company whose common shares are listed on the Toronto Stock Exchange. The Company is eligible to file its registration statement pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on Form 40-F pursuant to the multi-jurisdictional disclosure system of the Exchange Act. The Company is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act. Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the Exchange Act pursuant to Rule 3a12-3.

 

References to the “Registrant” or “Company” in this Registration Statement mean Orla Mining Ltd. and its subsidiaries, unless the context suggests otherwise.

 

PRINCIPAL DOCUMENTS

 

Each of the documents that is filed as an exhibit to this Registration Statement, as set forth in the Exhibit Index attached hereto, is incorporated by reference herein.

 

In accordance with General Instruction B.(1) of Form 40-F, the Registrant hereby incorporates by reference Exhibits 99.1 through 99.107, inclusive, as set forth in the Exhibit Index attached hereto.

 

In accordance with General Instruction D.(9) of Form 40-F, the Registrant has filed written consents of certain experts named in the foregoing Exhibits as Exhibit 99.89 to Exhibit 99.106, inclusive, as set forth in the Exhibit Index attached hereto and as required by General Instruction D.(9) of Form 40-F.

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Exchange Act, the Private Securities Litigation Reform Act of 1995 or in rules and releases made by the United States Securities and Exchange Commission (“SEC”), all as may be amended from time to time, as well as Canadian securities legislation and all other applicable securities legislation (referred to herein as “forward-looking statements”). Forward-looking statements are included to provide information about management’s current expectations and plans that allows investors and others to get a better understanding of the Company’s operating environment, business operations and financial performance and condition.

 

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved (or the negative of any of these terms and similar expressions) are not statements of fact and may be forward-looking statements.

 

Forward-looking statements are necessarily based upon a number of factors and assumptions that, if untrue, could cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such statements. Forward-looking statements are based upon a number of estimates and assumptions that, while considered reasonable by the Company at this time, are inherently subject to significant business, economic and competitive uncertainties and contingencies that may cause the Company’s actual financial results, performance, or achievements to be materially different from those expressed or implied herein. Some of the material factors or assumptions used to develop forward-looking statements include, without limitation, the future price of gold, anticipated costs and the Company’s ability to fund its programs, the Company’s ability to carry on exploration and development activities, the Company’s ability to meet obligations under property agreements, the timing and results of drilling programs, the discovery of mineral resources and mineral reserves on the Company’s mineral properties, the timely receipt of required approvals and permits, including those approvals and permits required for successful project permitting, construction and operation of projects, the costs of operating and exploration expenditures, the Company’s ability to operate in a safe, efficient and effective manner and the Company’s ability to obtain financing as and when required and on reasonable terms.

 

 

 

 

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Certain important factors that could cause actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others: (i) access to additional capital; (ii) uncertainty and variations in the estimation of mineral resources and mineral reserves; (iii) health, safety and environmental risks; (iv) success of exploration, development and operations activities; (v) risks relating to foreign operations and expropriation or nationalization of mining operations; (vi) delays in obtaining or failure to obtain governmental permits, or non-compliance with permits; (vii) delays in getting access from surface rights owners; (viii) uncertainty in estimates in production, capital and operation costs and potential of production and cost overruns; (ix) the impact of Panamanian or Mexican laws regarding foreign investment; (x) the fluctuating price of gold; (xi) assessments by taxation authorities in multiple jurisdictions; (xii) uncertainties related to title to mineral properties; (xiii) the Company’s ability to identify, complete and successfully integrate acquisitions; (xiv) global health emergencies, and (xv) volatility in the market price of the Company’s securities.

 

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Although the Company believes its expectations are based upon reasonable assumptions and have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. See the section entitled “Risk Factors” in the Company's most recently filed Annual Information Form (the “AIF”) filed as Exhibit 99.36 to this Registration Statement and its management's discussion and analysis for the three and nine months ended September 30, 2020 filed as Exhibit 99.03 to this Registration Statement.

 

Investors are cautioned not to put undue reliance on forward-looking statements. The forward-looking statements contained herein are made as of the date hereof and, accordingly, are subject to change after such date. The Company disclaims any intent or obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of assumptions or factors, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. Investors are urged to read the Company’s subsequent filings with Canadian securities regulatory agencies, which can be viewed online under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com.

 

DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING REQUIREMENTS

 

The Company is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this Registration Statement in accordance with Canadian disclosure requirements, which are different from those of the United States. The Company prepares its financial statements, which are filed with this Form 40-F in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, and the audit is subject to Canadian auditing and auditor independence standards, and may not be comparable to those prepared by companies in the United States. In addition, the Company is not required to prepare a reconciliation of its financial statements between IFRS and U.S. generally accepted accounting principles, and has not quantified such differences, which may be significant.

 

CAUTIONARY NOTE REGARDING MINERAL RESOURCE AND RESERVE ESTIMATES

 

The Company prepares its information concerning resources and mineral deposits in accordance with the requirements of Canadian securities laws, which differ significantly from the requirements of U.S. securities laws. Canadian reporting requirements for disclosure of mineral properties are governed by Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). The definitions used in NI 43-101 are incorporated by reference from the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) – Definition Standards adopted by CIM Council on May 10, 2014. U.S. reporting requirements are currently governed by the SEC Industry Guide 7 (“Industry Guide 7”) under the Securities Act. These reporting standards have similar goals in terms of conveying an appropriate level of confidence in the disclosures being reported, but embody different approaches and definitions. For example, the terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in NI 43-101, and these definitions differ from the definitions in Industry Guide 7. Under Industry Guide 7 standards, a “final” or “bankable” feasibility study is required to report reserves and the primary environmental analysis or report must be filed with the appropriate governmental authority. Further, under Industry Guide 7, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. If applicable, mineral reserve estimates contained in this Registration Statement and the documents incorporated by reference herein may not qualify as “reserves” under Industry Guide 7. Further, the SEC has not recognized the reporting of mineral deposits which do not meet the Industry Guide 7 definition of “reserve” prior to the adoption of the Modernization of Property Disclosures for Mining Registrants, which rules will be required to be complied with by certain issuers in the first fiscal year beginning on or after January 1, 2021.

 

 

 

 

While the terms “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in and required to be disclosed by NI 43-101, these terms are not defined terms under Industry Guide 7 and are normally not permitted to be used in reports and registration statements filed with the SEC. U.S. readers are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. In addition, “inferred mineral resources” have a great amount of uncertainty as to their existence and their economic and legal feasibility. A significant amount of exploration must be completed in order to determine whether an inferred mineral resource may be upgraded to a higher category. Under Canadian securities regulations, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. Readers are cautioned not to assume that all or any part of an inferred mineral resource exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian securities regulations if such disclosure includes the grade or quality and the quantity for each category of mineral resource and mineral reserve; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in place tonnage and grade without reference to unit measures.

 

Accordingly, information contained in this Registration Statement and the documents incorporated by reference herein containing descriptions of the Company’s mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder.

 

TAX MATTERS

 

Purchasing, holding, or disposing of securities of the Registrant may have tax consequences under the laws of the United States and Canada that are not described in this Registration Statement on Form 40-F.

 

DESCRIPTION OF THE COMMON SHARES

 

The required disclosure is included under the heading “Description of Capital Structure” in the Registrant's AIF for the fiscal year ended December 31, 2019, filed as Exhibit 99.30 to this Registration Statement.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Registrant does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Registrant's financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

CURRENCY

 

Unless otherwise indicated, all dollar amounts in this Registration Statement on Form 40-F are in United States dollars. The exchange rate of Canadian dollars into United States dollars, based upon the daily exchange rate as quoted by the Bank of Canada, was US$1.00 = CDN$1.2988 on December 31, 2019 and US$1.00 = CDN$1.2880 on December 3, 2020.

 

 

 

 

CONTRACTUAL OBLIGATIONS

 

The following table summarizes the Registrant's contractual obligations, including payments due for each of the next five years and thereafter as at December 31, 2019. This table is presented in Canadian dollars.

 

    Payments due by period  
Contractual Obligations   Total
($)
    Less than
1 year
($)
    1 – 3
years
($)
    3 – 5
years
($)
    More than
5 years
($)
 
Routine accounts payable   $ 639,000     $ 639,000                    
Lease obligations     99,000       41,000       58,000              
Camino Rojo Project Loan (note 1)     32,470,000                   32,470,000        
Newmont Loan (note 2)     15,104,000             15,104,000              
Total   $ 48,312,000     $ 680,000     $ 15,162,000     $ 32,470,000        

 

Notes:

 

1. The Camino Rojo Project Loan is denominated in United States dollars, and at December 31, 2019, the principal outstanding was US$ 25 million.

 

2. The Newmont Loan is denominated in Mexican pesos, and at December 31, 2019, the principal outstanding was 219 million Mexican pesos.

  

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

 

A. Undertaking

The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

 

B. Consent to Service of Process

Concurrently with the filing of this Registration Statement on Form 40-F, the Registrant will file with the Commission an Appointment of Agent for Service of Process and Undertaking on Form F-X in connection with the class of securities to which this Registration Statement relates.

 

Any change to the name or address of the Registrant's agent for service shall be communicated promptly to the Commission by amendment to Form F-X referencing the file number of the Registrant.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized.

 

Date: December 4, 2020 Orla Mining Ltd.
   
  /s/ Jason Simpson
  Jason Simpson
  President and Chief Executive Officer 

 

 

 

 

EXHIBIT INDEX

 

Exhibit
Number
 
99.01 News release, filed on November 26, 2020
99.02 Condensed interim consolidated financial statements for the three and nine months ended September 30, 2020, filed on November 13, 2020
99.03 Management’s discussion and analysis for the three and nine months ended September 30, 2020, filed on November 13, 2020
99.04 Certification of interim filings - CEO, filed on November 13, 2020
99.05 Certification of interim filings - CFO, filed on November 13, 2020
99.06 News release, filed on November 2, 2020
99.07 News release, filed on August 24, 2020
99.08 News release, filed on August 13, 2020
99.09 Condensed interim consolidated financial statements for the three and six months ended June 30, 2020 and 2019, filed on August 10, 2020
99.10 Management's discussion and analysis for the three and six months ended June 30, 2020, filed on August 10, 2020
99.11 Certification of interim filings – CEO, filed on August 10, 2020
99.12 Certification of interim filings – CFO, filed on August 10, 2020
99.13 News release, filed on July 2, 2020
99.14 Orla Mining Ltd. 2020 Restricted Share Unit Plan effective April 2, 2020, filed on June 11, 2020
99.15 Report on voting results, filed on May 13, 2020
99.16 Condensed consolidated interim financial statements for the three months ended March 31, 2020 and 2019, filed on May 12, 2020
99.17 Management's discussion and analysis for the three months ended March 31, 2020, filed on May 12, 2020
99.18 Certification of interim filings – CEO, filed on May 12, 2020
99.19 Certification of interim filings – CFO, filed on May 12, 2020
99.20 Notice of annual and special meeting and Management Information Circular, filed on April 14, 2020
99.21 Form of proxy - Annual general and special meeting to be held on Wednesday, May 13, 2020, filed on April 14, 2020
99.22 News release, filed on April 9, 2020
99.23 Notice of predecessor auditor pursuant to NI 51 – 102 of change of auditor, filed on April 8, 2020
99.24 Notice of successor auditor pursuant to NI 51 – 102 of change of auditor, filed on April 8, 2020
99.25 Notice of change of auditor, filed on April 8, 2020
99.26 Material change report, filed on April 6, 2020
99.27 News release, filed on April 3, 2020

 

 

 

 

99.28 Notice of the meeting and record date (Amended), filed on April 3, 2020
99.29 Prospectus Supplement to the Short Form Base Shelf Prospectus dated March 11, 2019, filed on March 30, 2020
99.30 Underwriting Agreement, filed on March 30, 2020
99.31 Marketing materials, filed on March 27, 2020
99.32 News release, filed on March 26, 2020
99.33 Material change report, filed on March 25, 2020
99.34 Management's discussion and analysis for the year ended December 31, 2019, filed on March 23, 2020
99.35 Certification of annual filings – CFO, filed on March 23, 2020
99.36 Annual Information Form for the year ended December 31, 2019, filed on March 23, 2020
99.37 Certification of annual filings – CEO, filed on March 23, 2020
99.38 Class 1 Reporting Issuers and Class 3B Reporting Issuers Participation Fee, filed on March 23, 2020
99.39 Consolidated financial statements for the years ended December 31, 2019 and 2018, filed on March 23, 2020
99.40 Notice of the meeting and record date, filed on March 6, 2020
99.41 Early warning report, filed on January 7, 2020
99.42 Report of exempt distribution, filed on December 30, 2019
99.43 Amended material change report, filed on December 30,2019
99.44 Amended and Restated Investor Rights Agreement, filed on December 23, 2019
99.45 Loan Agreement, filed on December 23, 2019
99.46 News release, filed on December 18, 2019
99.47 Condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and 2018, filed on November 12, 2019
99.48 Management's discussion and analysis for the three and nine months ended September 30, 2019, filed on November 12, 2019
99.49 Certification of interim filings – CEO, filed on November 12, 2019
99.50 Certification of interim filings – CFO, filed on November 12, 2019
99.51 Material change report, filed on October 29, 2019

 

 

 

 

99.52 Investor Rights Agreement, filed on October 29, 2019
99.53 Loan commitment letter of Trinity Capital Partners Corporation, filed on October 29, 2019
99.54 Early warning report, filed on October 23, 2019
99.55 News release, filed on October 21, 2019
99.56 News release, filed on September 9, 2019
99.57 Condensed interim consolidated financial statements for the three and six months ended June 30, 2019 and 2018, filed on August 9, 2019
99.58 Management's discussion and analysis for the three and six months ended June 30, 2019, filed on August 9, 2019
99.59 Certification of interim filings – CEO, filed on August 9, 2019
99.60 Certification of interim filings – CFO, filed on August 9, 2019
99.61 News release, filed on August 7, 2019
99.62 NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico, filed on August 6, 2019
99.63 Report of exempt distribution, filed on July 25, 2019
99.64 Orla Mining Ltd. Stock Option Plan Effective December 16, 2016, and amended May 24, 2018 and June 12, 2019, filed on July 24, 2019
99.65 Orla Mining Restricted Share Unit Plan Effective June 27, 2018, and amended June 12, 2019, filed on July 24, 2019
99.66 Orla Mining Deferred Share Plan Effective June 27, 2018, amended June 12, 2019, filed on July 24, 2019
99.67 News release, filed on July 15, 2019
99.68 News release, filed on June 25, 2019
99.69 News release, filed on June 12, 2019
99.70 Report on voting results, filed on June 12, 2019
99.71 Notice of annual and special meeting and Management Information Circular, filed on May 14, 2019
99.72 Certificate relating to Communication with Beneficial Owners, filed on May 14, 2019
99.73 Form of proxy - Annual general and special meeting to be held on Wednesday, June 12, 2019, filed on May 14, 2019

 

 

 

 

99.74 News release, filed on May 14, 2019
99.75 Condensed interim consolidated financial statements for the three months ended March 31, 2019 and 2018, filed on May 9, 2019
99.76 Management's discussion and analysis for the three months ended March 31, 2019, filed on May 9, 2019
99.77 Certification of interim filings – CEO, filed on May 9, 2019
99.78 Certification of interim filings – CFO, filed on May 9, 2019
99.79 Notice of the meeting and record date, filed on April 3, 2019
99.80 Annual Information Form for the year ended December 31, 2018, filed on March 29, 2019
99.81 Form 52-109F1 – IPO/RTO Certification of Annual Filings Following an Initial Public Offering, Reverse Takeover or Becoming A Non-Venture Issuer – CEO, filed on March 29, 2019
99.82 Form 52-109F1 – IPO/RTO Certification of Annual Filings Following an Initial Public Offering, Reverse Takeover or Becoming A Non-Venture Issuer – CFO, filed on March 29, 2019
99.83 Class 1 Reporting Issuers and Class 3B Reporting Issuers Participation Fee, filed on March 18, 2019
99.84 Consolidated financial statements for the years ended December 31, 2018 and 2017, filed on March 18, 2019
99.85 Management's discussion and analysis for the year ended December 31, 2018, filed on March 18, 2019
99.86 News release, filed on March 11, 2019
99.87 Short Form Base Shelf Prospectus, filed on March 11, 2019
99.88 Amended NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico, filed on March 11, 2019
99.89 Consent of David Brown
99.90 Consent of George Lightwood
99.91 Consent of Gene Tortelli
99.92 Consent of Carl E. Defilippi
99.93 Consent of David B. Hawkins
99.94 Consent of Dr. Matthew Gray
99.95 Consent of Michael G. Hester
99.96 Consent of Hans Smit

 

 

 

 

99.97 Consent of P&E Mining Consultants Inc.
99.98 Consent of Auditors – Davidson & Company LLP
99.99 Consent of Eugene Puritch
99.100 Consent of Richard H. Sutcliffe
99.101 Consent of Tracy Armstrong
99.102 Consent of Antoine Yassa
99.103 Consent of Kenneth Kuchling
99.104 Consent of David Burga
99.105 Consent of Fred Brown
99.106 Consent of Mark Gorman
99.107 News release, filed on December 4, 2020

 

 

 

Exhibit 99.1

 

NEWS RELEASE   

 

ORLA MINING PROVIDES CONSTRUCTION UPDATE FOR CAMINO ROJO OXIDE GOLD PROJECT

 

VANCOUVER, BC – November 26, 2020 - Orla Mining Ltd. (TSX: OLA) (“Orla” or the "Company") is pleased to announce the start of earth moving activities at its Camino Rojo Oxide Gold Project (“Camino Rojo”) located in Zacatecas State, Mexico.

 

“The start of earth moving on site marks another important milestone in the development of Camino Rojo made possible through the collective efforts of our team and stakeholders,” stated Jason Simpson, President and Chief Executive Officer of Orla. “Project advancement continues in a controlled manner as we focus on maintaining the health and safety of our personnel.”

 

All permit conditions have been satisfied, including placing of an environmental bond, for site activities to begin. Major contracts for earth moving and civil works have been awarded and detailed engineering is 90% complete. Current activities include mobilization of the earthworks contractor, installation of the construction camp and offices, flora and fauna rescue, as well as site fence erection. Construction of the power line to site continues ahead of schedule thereby reducing some of the diesel generation required during the first year of production. Process plant equipment has started to arrive on site, including crusher and conveyor equipment.

 

Under Mexico’s current COVID-19 legislation, mining and construction are permitted economic activities and the Camino Rojo site has been ramping up in strict compliance with the Mexican Health Authority and Company requirements. Orla has implemented a strict COVID-19 protocol, including rigorous screening and testing programs as it began controlled mobilization to site for construction. Orla continues to maintain robust organization-wide COVID-19 prevention protocols to support the health of employees and local communities. The Company is closely monitoring the potential impacts from the pandemic on areas including equipment delivery and logistics, construction costs and schedule, as well as community and government relations.

 

About Orla Mining Ltd.

 

Orla is constructing the Camino Rojo Oxide Gold Project, a gold and silver open-pit and heap leach project, located in Zacatecas State, Central Mexico. The project is 100% owned by Orla and covers over 160,000 hectares. The technical report entitled “Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project — Municipality of Mazapil, Zacatecas, Mexico” dated June 25, 2019 is available on SEDAR under the Company’s profile as well as on Orla’s website at www.orlamining.com. Orla also owns 100% of the Cerro Quema Project located in Panama which includes a near-term gold production scenario and various exploration targets. The Cerro Quema Project is a proposed open pit mine and gold heap leach operation. Please refer to the “Cerro Quema Project - Pre-feasibility Study on the La Pava and Quemita Oxide Gold Deposits” dated August 15, 2014, which is available on SEDAR.

 

1

 

 

NEWS RELEASE   

 

Forward-looking Statements

 

This news release contains certain “forward-looking statements” within the meaning of Canadian and United States securities legislation, including, without limitation, statements with respect to the timing of meeting certain conditions with respect to the approval of the MIA, the timing of commencement of construction activities, the results of exploration and planned exploration programs, the potential for discovery of additional mineral resources and the Company’s objectives and strategies. Forward-looking statements are statements that are not historical facts which address events, results, outcomes or developments that the Company expects to occur. Forward-looking statements are based on the beliefs, estimates and opinions of the Company’s management on the date the statements are made and they involve a number of risks and uncertainties. Certain material assumptions regarding such forward-looking statements are discussed in this news release, including without limitation, the Company’s activities will be in accordance with the Company’s public statements and stated goals; that there will be no material adverse change affecting the Company or its properties; that all required approvals will be obtained and that there will be no significant disruptions affecting the Company or its properties. Consequently, there can be no assurances that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements involve significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: risks related to uncertainties inherent in the preparation of feasibility studies, drill results and the estimation of mineral reserves and mineral resources; and risks associated with executing the Company’s objectives and strategies, including costs and expenses. Except as required by the securities disclosure laws and regulations applicable to the Company, the Company undertakes no obligation to update these forward-looking statements if management’s beliefs, estimates or opinions, or other factors, should change.

 

For further information, please contact:

 

Jason Simpson
President & Chief Executive Officer

 

Andrew Bradbury

Director, Investor Relations

 

www.orlamining.com

info@orlamining.com

 

2

 

 

 

Exhibit 99.02

 

 

Condensed Interim Consolidated Financial Statements

 

Three and nine months ended September 30, 2020 and 2019

 

Presented in United States dollars

 

 

 

 

ORLA MINING LTD.

Condensed Interim Consolidated Balance Sheets

(Unaudited – Thousands of United States dollars)

 

    September 30     December 31     January 1  
As at   2020     2019     2019  
          (restated,
notes 3 and 22)
    (restated,
notes 3 and 22)
 
ASSETS                        
Current assets                        
Cash and cash equivalents   $ 41,743     $ 23,106     $ 12,234  
Accounts receivable     171       94       282  
Prepaid expenses     679       53       151  
      42,593       23,253       12,667  
Restricted funds     533       509       150  
VAT recoverable (note 7)     3,349       1,340       622  
Deposits on long term assets (notes 5(a)(i) and 20(a))     18,069              
Construction in progress (note 5(a)(i))     2,593              
Equipment (note 6)     255       284       252  
Exploration and evaluation assets (note 5(d))     118,923       125,643       124,099  
TOTAL ASSETS   $ 186,315     $ 151,029     $ 137,790  
                         
LIABILITIES                        
Current liabilities                        
Trade and other payables (note 8)   $ 1,222     $ 802     $ 1,278  
Accrued liabilities     3,452       1,578       1,405  
      4,674       2,380       2,683  
Lease obligations     22       44        
Camino Rojo project loan (note 9)     13,445       12,961        
Newmont loan (note 10)     8,093       9,647       4,475  
Accrued liabilities – long term     395       261        
Site closure provisions (note 11)     558       575       626  
TOTAL LIABILITIES     27,187       25,868       7,784  
                         
SHAREHOLDERS' EQUITY                        
Share capital (note 13)     219,169       159,230       153,852  
Reserves     29,570       30,061       19,931  
Accumulated other comprehensive income (loss)     (6,459 )     (1,027 )     (3,393 )
Accumulated deficit     (83,152 )     (63,103 )     (40,384 )
TOTAL SHAREHOLDERS' EQUITY     159,128       125,161       130,006  
                         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 186,315     $ 151,029     $ 137,790  

 

Authorized by the Board of Directors on November 12, 2020, for issuance.

 

/s/ Elizabeth McGregor   /s/ Jason Simpson
Elizabeth McGregor, Director   Jason Simpson, 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 Loss and Comprehensive Loss

(Unaudited – Thousands of United States dollars, except per-share amounts)

 

    Three months ended
September 30
    Nine months ended
September 30
 
    2020     2019
(restated
note 3)
    2020     2019
(restated
note 3)
 
EXPLORATION AND EVALUATION EXPENSES (note 5)                                
Assays and analysis   $ 59     $ 38     $ 88     $ 160  
Drilling     258       292       258       1,021  
Geological     379       289       799       1,260  
Engineering     222       198       752       1,500  
Environmental     123       213       214       530  
Community and government     827       1,003       3,348       1,353  
Land and water use, claims and concessions     695       974       3,855       3,286  
Project management           38             131  
Project review           27       6       115  
Site activities     357       379       1,183       1,265  
Site administration     670       177       1,841       1,264  
Recognition of site closure provisions                 15        
      3,590       3,628       12,359       11,885  
                                 
GENERAL AND ADMINISTRATIVE EXPENSES                                
Office and administrative     162       97       541       381  
Professional fees     425       170       831       374  
Regulatory     11       30       159       95  
Salaries and benefits     563       423       1,354       1,256  
      1,161       720       2,885       2,106  
                                 
OTHER EXPENSES (INCOME)                                
Depreciation (note 6)     23       25       70       72  
Share based payments (note 14)     705       580       2,089       2,195  
Interest and finance costs (note 12)     1,503       467       2,718       723  
Foreign exchange loss (gain)     1,688       (1 )     947       19  
Other (gains) and losses (note 10)     (1,019 )           (1,019 )      
      2,900       1,071       4,805       3,009  
                                 
LOSS FOR THE PERIOD   $ 7,651     $ 5,419     $ 20,049     $ 17,000  
                                 
OTHER COMPREHENSIVE LOSS (INCOME)                                
Items that may in future periods be reclassified to profit or loss:                                
Foreign currency differences arising on translation of foreign operations     (2,934 )     833       5,432       (305 )
TOTAL COMPREHENSIVE LOSS   $ 4,717     $ 6,252     $ 25,481     $ 16,695  
                                 
Weighted average number of common shares outstanding (millions)     227.5       185.1       213.1       181.4  
                                 
Loss per share - basic and diluted   $ 0.03     $ 0.03     $ 0.09     $ 0.09  

 

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
September 30
    Nine months ended
September 30
 
        2019         2019  
Cash flows provided by (used in):   2020     (restated
note 3)
    2020     (restated
note 3)
 
OPERATING ACTIVITIES                                
Loss for the period   $ (7,651 )   $ (5,419 )   $ (20,049 )   $ (17,000 )
Adjustments for items not affecting cash:                                
Depreciation     23       25       70       72  
Share based compensation     705       580       2,089       2,195  
Changes in site closure provisions charged to exploration expense                 15        
Newmont loan proceeds received in excess of fair value (note 10)           (572 )           (1,283 )
Accretion of the project loan (note 9)     646             1,950        
Interest paid on the project loan (note 9)     (550 )           (1,667 )      
Accretion of the Newmont loan (note 10)     917       481       974       805  
Interest expense on leases     3             4        
Other gains and losses     (1,019 )           (1,019 )      
Exploration expenses paid via issuance of common shares                       48  
Changes in non-cash working capital:                                
Accounts receivable and prepaid expenses     (668 )     100       (733 )     415  
Trade and other payables     455       (665 )     485       (1,254 )
Accrued liabilities     299       82       2,187       (416 )
Cash used in operating activities     (6,840 )     (5,388 )     (15,694 )     (16,418 )
                                 
FINANCING ACTIVITIES                                
Proceeds from issuance of common shares                 54,959        
Proceeds from exercise of warrants     1,259       2,616       2,806       2,877  
Proceeds from exercise of stock options     1,470       349       1,689       349  
Share issuance costs           (84 )     (2,095 )     (96 )
Payment of principal portion of lease liabilities     (8 )     (5 )     (23 )     (15 )
Cash transaction costs of the Camino Rojo project loan     (35 )           (35 )      
Advances received on the Newmont loan           2,396             5,070  
Cash provided by financing activities     2,686       5,272       57,301       8,185  
                                 
INVESTING ACTIVITIES                                
Purchase of equipment     (58 )     (5 )     (66 )     (9 )
Construction in progress     (1,134 )           (2,685 )      
Deposits on long term assets     (8,242 )           (18,709 )      
Restricted cash funded     (4 )     (51 )     (25 )     (354 )
Value added taxes paid, not immediately recoverable     (1,454 )     (131 )     (2,297 )     (424 )
Cash used in investing activities     (10,892 )     (187 )     (23,782 )     (787 )
                                 
Effects of exchange rate changes on cash     2,124       338       812       662  
                                 
Net increase (decrease) in cash     (12,922 )     35       18,637       (8,358 )
Cash, beginning of period     54,665       3,841       23,106       12,234  
CASH, END OF PERIOD   $ 41,743     $ 3,876     $ 41,743     $ 3,876  

 

Supplemental cash flow information (note 16)

 

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     Accumulated              
    Number of
shares
(thousands)
    Amount     Share based
payments reserve
    Warrants
reserve
    Total     Other
Comprehensive
Income
    Retained
earnings
(deficit)
    Total  
Balance at January 1, 2019 (restated, note 3)     179,315     $ 153,852     $ 6,867     $ 13,064     $ 19,931     $ (3,393 )   $ (40,384 )   $ 130,006  
Shares issued for property payments     59       48                                     48  
Warrants exercised     6,167       4,433             (1,535 )     (1,535 )                 2,898  
Warrants issued           (1,459 )           1,459       1,459                    
Options exercised     338       675       (329 )           (329 )                 346  
Share issuance costs           (96 )                                   (96 )
RSUs redeemed     202       167       (167 )           (167 )                  
Share based payments                 2,195             2,195                   2,195  
Loss for the period                                         (17,000 )     (17,000 )
Other comprehensive loss                                   305             305  
Balance at September 30, 2019     186,081     $ 157,620     $ 8,566     $ 12,988     $ 21,554     $ (3,088 )   $ (57,384 )   $ 118,702  
                                                                 
Balance at January 1, 2020     187,102     $ 159,230     $ 8,159     $ 21,902     $ 30,061     $ (1,027 )   $ (63,103 )   $ 125,161  
Shares issued pursuant to a financing     36,600       54,959                                     54,959  
Share issuance costs           (2,095 )                                   (2,095 )
Warrants exercised     2,013       3,305             (499 )     (499 )                 2,806  
Options exercised     1,837       3,041       (1,352 )           (1,352 )                 1,689  
RSUs redeemed     414       335       (335 )           (335 )                  
Bonus shares issued (note 14(d))     1,000       394       (394 )           (394 )                  
Share based payments                 2,089             2,089                   2,089  
Loss for the period                                         (20,049 )     (20,049 )
Other comprehensive loss                                   (5,432 )           (5,432 )
Balance at September 30, 2020     228,966     $ 219,169     $ 8,167     $ 21,403     $ 29,570     $ (6,459 )   $ (83,152 )   $ 159,128  

 

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 and nine months ended September 30, 2020 and 2019

(Unaudited – 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. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries. The registered office of the Company is located at Suite 202, 595 Howe Street, Vancouver, Canada.

 

The Company is engaged in the acquisition, exploration, and development of mineral properties, and holds the Camino Rojo gold and silver project in Zacatecas State, Mexico, and the Cerro Quema gold project in Panama.

 

These 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. As at September 30, 2020, the Company had not advanced any of its properties to commercial production and was not able to fund day-to-day activities through operating activities. During the second quarter of 2020, the Company completed a C$75 million ($55 million) equity financing. To the end of the reporting period, the Company had received $25 million of a $125 million project loan facility in respect of the Camino Rojo project, and subsequent to the reporting period received a further $50 million.

 

The Company’s continuation as a going concern is dependent upon successful results from our mineral exploration and development activities and our ability to attain profitable operations and generate cash or raise sufficient capital to meet current and future obligations. We expect to fund operating costs of the Company over the next twelve months with cash on hand and with further loan and/or equity advances.

 

Since the beginning of the fiscal year, there was a global outbreak of the novel coronavirus (“COVID-19”), which has had an impact on businesses through the restrictions put in place by the governments in the various jurisdictions where the Company conducts its activities. In common with all businesses in the jurisdictions in which we operate, our activities are restricted by government orders related to, among others, travel, business operations, and stay-at-home orders. As of the date of these financial statements, it is not possible to determine the extent of the impact that this global health emergency will have on the Company’s activities in the future as the Company cannot predict the ultimate geographic spread of the disease, the duration of the outbreak, and possible government, societal, and individual responses to the situation. We continue to monitor our activities, in particular with regard to the safety of our personnel and the communities where we conduct our activities.

 

2. BASIS OF PREPARATION

 

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 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 November 12, 2020, the Board of Directors approved these consolidated financial statements for issuance.

 

Page 6

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts)

 

3. CHANGE OF PRESENTATION CURRENCY

 

As a result of the continued advancement of the Camino Rojo Project, the Company changed its presentation currency from Canadian dollars to United States dollars effective January 1, 2020. The change in the financial statement presentation currency is an accounting policy change and has been accounted for retrospectively. The balance sheets for each period presented have been translated from the related subsidiary’s functional currency to the new US dollar presentation currency at the rate of exchange prevailing at the respective balance sheet date except for equity items, which have been translated at accumulated historical rates from the related subsidiary’s date of incorporation. The statements of loss and comprehensive loss were translated at the average exchange rates for the reporting period, or at the exchange rate prevailing at the date of transactions. Exchange differences arising in 2018 on translation from the related subsidiary’s functional currency to the United States dollar presentation currency have been recognized in other comprehensive income and accumulated as a separate component of equity.

 

In prior reporting periods, the translation of the Company’s subsidiaries that had a United States dollar or Mexican peso functional currency into the Company’s presentation currency of the Canadian dollar gave rise to a translation adjustment which was recorded as an adjustment to accumulated other comprehensive income (“AOCI”), a separate component of shareholders’ equity. With the retrospective application of the change in presentation currency from the Canadian dollar to the US dollar, the AOCI related to the translation of US dollar functional currency subsidiaries was eliminated. However, with the retrospective application of the change in presentation currency to the US dollar, the Company’s corporate office, which has a Canadian dollar functional currency, resulted in an AOCI balance. The AOCI balance generated by the Mexican peso entities has been adjusted since it now reflects the translation into the new US dollar presentation currency.

 

(a) Adjustment to previously reported financial information due to change in presentation currency

 

For comparative purposes, the consolidated balance sheets as at December 31, 2019 and January 1, 2019 include adjustments to reflect the change in the presentation currency to the US dollar, which is a change in accounting policy. The exchange rates used to translate the amounts previously reported into US dollars at December 31, 2019 were 1.2988 CAD/USD and 18.87 MXN/USD, and at January 1, 2019 were 1.3642 CAD/USD and 19.65 MXN/USD. Refer to note 22(a) for the effects of the translation.

 

For comparative purposes, the consolidated statement of loss and comprehensive loss for the three and nine months ended September 30, 2019 includes adjustments to reflect the change in the presentation currency to the US dollar, which is a change in accounting policy. The exchange rates used to translate the amounts previously reported into US dollars for the three and nine months ended September 30, 2019 were 1.3292 CAD/USD and 19.2511 MXN/USD, which were the average exchange rates for the period. Refer to note 22(b) for the effects of the translation.

 

(b) Functional currency

 

The functional currencies of the Company and its subsidiaries, all of which are wholly owned, remained unchanged and were as follows for periods presented.

 

Orla Mining Ltd. Canadian dollars
  Minerometalúrgica San Miguel S de RL de CV Mexican pesos
  Minera Camino Rojo SA de CV Mexican pesos
  Minera Cerro Quema SA United States dollars
  Monitor Gold Corporation United States dollars

 

4. SIGNIFICANT ACCOUNTING POLICIES

 

We applied the same accounting policies in these condensed interim consolidated financial statements as those applied in the Company’s annual audited consolidated financial statements as at and for the year ended December 31, 2019.

 

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 annual consolidated financial statements as at and for the year ended December 31, 2019.

 

These condensed interim consolidated financial statements should be read in conjunction with the Company’s annual audited consolidated financial statements as at and for the years ended December 31, 2019 and 2018.

 

Page 7

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts)

 

5. EXPLORATION AND EVALUATION

 

(a) Camino Rojo Project

 

The Camino Rojo Project lies 190 km NE of the city of Zacatecas, 48 km S-SW of the town of Concepcion del Oro, and 54 km S-SE of Newmont Corporation’s (“Newmont”) Peñasquito Mine. In November 2017, we acquired the Camino Rojo Project, a gold and silver oxide heap leach project located in Zacatecas State, Mexico, from Goldcorp Inc. (now called Newmont Corporation). A 2% net smelter return royalty (the “Royalty”) on the sale of all metal production from the oxide material at Camino Rojo was granted to Newmont as part of the acquisition.

 

The Company and Newmont also entered into an option agreement regarding the potential development of sulphide operations at Camino Rojo. Pursuant to the option agreement, Newmont will, subject to the applicable sulphide project meeting certain thresholds, have an option to acquire a 60% or 70% interest in the applicable sulphide project (“Sulphide Option”). The Royalty excludes revenue on the sale of metals produced from a sulphide project where Newmont has exercised its Sulphide Option. We maintain a right of first refusal on the Royalty. On September 21, 2020, Newmont announced that it had entered into an agreement to sell the Royalty. Our right of first refusal expires on December 20, 2020.

 

As of the issuance date of these financial statements, we have received all permits for the construction of a mine at Camino Rojo. The permits were issued with a series of customary conditions, all of which have been met or have been submitted for final approval. In anticipation of such approvals, we have already commenced activities such as construction engineering and design work which are not necessarily of an exploration and evaluation nature. Consequently, we are presenting these costs as construction in progress.

 

(i) Construction in progress

 

    Total  
Construction in progress at historical rates        
At December 31, 2019   $  
Additions     2,685  
At September 30, 2020   $ 2,685  
         
Accumulated foreign exchange on translation        
At December 31, 2019      
Due to changes in exchange rates     (92 )
At September 30, 2020   $ (92 )
         
Construction in progress        
At December 31, 2019   $  
At September 30, 2020   $ 2,593  

 

The figures in the above totals do not include deposits which have been made on key components and construction items related to the Camino Rojo project, which at September 30, 2020, totaled approximately $18.1 million (December 31, 2019 – $nil).

 

(b) Cerro Quema Project

 

The Cerro Quema Project is located on the Azuero Peninsula in Los Santos Province, Panama. The project is at the exploration and development stage for a proposed open pit mine with process by heap leaching.

 

In December 2016, we acquired 100% of the Cerro Quema Project by acquiring Pershimco Resources Inc. through the issuance of a combination of Orla common shares and warrants, and the assumption of Pershimco’s long term debt, which we subsequently paid off. We own the mineral rights as well as the surface rights over the current mineral resource areas, proposed mine development areas, and priority drill target areas.

 

Page 8

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts)

 

The original 20-year terms for these concessions expired in February and March of 2017. The Company has applied for the prescribed ten year extension to these concessions as it is entitled to under Panamanian mineral law. In March 2017, the Ministry of Commerce and Industry provided written confirmation to the Company that the extension applications had been received and that exploration work could continue while the Company awaits renewal of the concessions. As of the date of these financial statements, final concession renewals have not been received; however, we continue to receive ongoing drilling, water use, environmental and other permits, and have paid concession taxes, in the normal course.

 

(c) Monitor Gold Project

 

The Monitor Gold Project consists of three separate option agreements consisting of 422 claims covering 3,416 hectares in Nye County, Nevada, USA.

 

In 2019, the payments required under the option agreements consisted of $50,000 in share issuances, a $20,000 in advance royalty payments, and $30,000 in work commitments, all of which requirements were met by the Company. For 2020, these consist of $40,000 in advance royalty payments, and $75,000 in work commitments, both of which requirements for 2020 have been met. To maintain the option agreements in good standing, minimum payments and work commitments are required each year until 2038.

 

(d) Exploration and evaluation assets

 

    Camino
Rojo
    Cerro
Quema
    Monitor
Gold
    Total  
Acquisition costs at historical rates                                
At December 31, 2019   $ 42,615     $ 82,429     $ 314     $ 125,358  
Additions                        
At September 30, 2020   $ 42,615     $ 82,429     $ 314     $ 125,358  
                                 
Accumulated foreign exchange on translation                                
At December 31, 2019     285                   285  
Due to changes in exchange rates     (6,720 )                 (6,720 )
At September 30, 2020   $ (6,435 )   $     $     $ (6,435 )
                                 
Acquisition costs                                
At December 31, 2019   $ 42,900     $ 82,429     $ 314     $ 125,643  
At September 30, 2020   $ 36,180     $ 82,429     $ 314     $ 118,923  

 

Page 9

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts)

 

(e) Exploration and evaluation expense

 

Three months ended September 30, 2020   Camino
Rojo
    Cerro
Quema
    Monitor
Gold
    Other     Total  
Assays and analysis   $ 59     $     $     $     $ 59  
Drilling     181       77                   258  
Geological     212       163       4             379  
Engineering     159       63                   222  
Environmental     52       71                   123  
Community and government     734       93                   827  
Land, water use, and claims     614             81             695  
Site activities     237       120                   357  
Site administration     208       461       1             670  
    $ 2,456     $ 1,048     $ 86     $     $ 3,590  

 

Nine months ended September 30, 2020   Camino
Rojo
    Cerro
Quema
    Monitor
Gold
    Other     Total  
Assays and analysis   $ 87     $     $ 1     $     $ 88  
Drilling     181       77                   258  
Geological     564       231       4             799  
Engineering     633       119                   752  
Environmental     106       108                   214  
Community and government     3,075       273                   3,348  
Land, water use, and claims     3,734             121             3,855  
Project review                       6       6  
Site activities     769       414                   1,183  
Site administration     1,016       824       1             1,841  
Recognition of site closure provisions     15                         15  
    $ 10,180     $ 2,046     $ 127     $ 6     $ 12,359  

 

Page 10

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts)

 

Three months ended September 30, 2019   Camino
Rojo
    Cerro
Quema
    Monitor
Gold
    Other     Total  
Assays and analysis   $ 24     $ 14     $     $     $ 38  
Drilling     287       5                   292  
Geological     252       31       6             289  
Engineering     194       4                   198  
Environmental     132       81                   213  
Community and government     892       111                   1,003  
Land, water use, and claims     774       119       81             974  
Project management     38                         38  
Project review                       27       27  
Site activities     370       9                   379  
Site administration     46       131                   177  
    $ 3,009     $ 505     $ 87     $ 27     $ 3,628  

 

Nine months ended September 30, 2019   Camino
Rojo
    Cerro
Quema
    Monitor
Gold
    Other     Total  
Assays and analysis   $ 123     $ 37     $     $     $ 160  
Drilling     1,016       5                   1,021  
Geological     756       472       32             1,260  
Engineering     1,496       4                   1,500  
Environmental     449       81                   530  
Community and government     1,101       252                   1,353  
Land, water use, and claims     3,008       121       157             3,286  
Project management     131                         131  
Project review                       115       115  
Site activities     800       465                   1,265  
Site administration     353       909       2             1,264  
    $ 9,233     $ 2,346     $ 191     $ 115     $ 11,885  

 

Page 11

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

6. EQUIPMENT

  

    Cost     Accumulated depreciation     Net book value  
    Begin of
year
    Changes
during
the
period
    Effect of
FX
    End of
period
    Begin of
year
    Changes
during
the
period
    Effect of
FX
    End of
period
    Begin
of year
    End of period  
Machinery and equipment   $ 324     $ 14     $ (18 )   $ 320     $ 205     $ 22     $ (4 )   $ 223     $ 119     $ 97  
Office equipment     36             (4 )     32       15       1       (1 )     15       21       17  
Computers and software     150       15       (8 )     157       96       21       (3 )     114       54       43  
Other equipment           2             2                                     2  
Vehicles     21       35       (1 )     55       2       6             8       19       47  
Buildings – leases     89             (2 )     87       18       20             38       71       49  
Total   $ 620     $ 66     $ (33 )   $ 653     $ 336     $ 70     $ (8 )   $ 398     $ 284     $ 255  

 

7. VALUE ADDED TAXES (“VAT”) RECOVERABLE

 

Our Mexican entities pay value-added taxes (called “IVA” in Mexico) on certain goods and services we purchase.

 

We also paid approximately 72 million Mexican pesos (approximately $3,860,000) of IVA on the initial acquisition of the Camino Rojo project, which is classified within exploration and evaluation assets as part of acquisition cost (note 5(a) and 5(d)).

 

IVA paid in Mexico is 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. Accordingly, we have classified Mexican IVA recoverable as long term.

 

8. TRADE AND OTHER PAYABLES

 

    September 30,
2020
    December 31,
2019
 
Trade payables   $ 964     $ 492  
Payroll related liabilities     233       208  
Lease obligations – current     25       23  
Interest payable on Camino Rojo project loan           79  
    $ 1,222     $ 802  

 

9. CAMINO ROJO PROJECT LOAN

 

In December 2019, the Company entered into a loan agreement with Trinity Capital Partners Corporation (“Trinity Capital”) and certain other lenders with respect to a credit debt facility of US$125 million for the development of the Camino Rojo Oxide Gold Project (the “Credit Facility”).

 

The Credit Facility provides a total of US$125 million to the Company, available in three tranches. The first tranche of US$25 million was drawn down by the Company on December 18, 2019 upon execution of the definitive loan documentation. The second and third tranches provide US$50 million each, available for drawdown after satisfaction of conditions precedent, including the receipt of certain key permits required for the development of the Camino Rojo project.

  

Subsequent to the reporting period, the Company drew upon the second tranche of this Credit Facility.

 

Page 12

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

The Credit Facility is denominated in United States dollars, and bears interest at 8.80% per annum, payable quarterly commencing March 31, 2020, and is secured by all the assets of the Camino Rojo Project and the fixed assets of the Cerro Quema Project. The principal amount is due upon maturity at December 18, 2024, with no scheduled principal re-payments prior to maturity. The Company may prepay the loan, in full or in part, at any time during the term without penalty, by using cash flow from operations. The Credit Facility does not impose on the Company any mandatory requirements of hedging, production payments, offtake, streams, or royalties.

  

On December 18, 2019, the Company issued 32.5 million common share purchase warrants (with an exercise price of C$3.00 per warrant and expiry date of December 18, 2026) to the lenders in connection with the closing of the Credit Facility.

  

    Nine months
ended
September 30, 2020
    Year
ended
December 31, 2019
 
Balance, beginning of year   $ 12,961     $  
Amounts drawn down during the period           25,000  
Cash transaction costs     (35 )     (3,158 )
Warrants issued to the lenders           (8,968 )
Amortization of the transaction costs     283       86  
Foreign exchange     236       1  
Balance, end of period   $ 13,445     $ 12,961  

 

10. NEWMONT LOAN

 

As part of the Company’s acquisition of the Camino Rojo project from Newmont, Newmont agreed to provide interest-free loans to the Company for all the annual landholding costs on the Camino Rojo project from November 7, 2017 until December 31, 2019. The loans are to be repaid upon declaration of commencement of commercial production of a heap leach operation at the Camino Rojo Project. To the date of these financial statements, 219,446,000 pesos had been advanced by Newmont under this agreement. No further advances in respect of this loan are expected.

 

The original agreement provided that the Company may, at its option, repay any amounts owing to Newmont, prior to maturity, in the form of (a) a lump sum cash payment, (b) the issuance of additional common shares of the Company, or (c) a combination of cash and shares (subject to certain maximum ownership limits). During the reporting period, the Company agreed with Newmont that the repayment would be made in cash.

 

Because the loan is non-interest bearing, for accounting purposes at the date of each advance, we discount the expected payments using a risk-adjusted discount rate and an estimated repayment date. Amounts received in excess of fair value on the date of the advances were credited to exploration expense.

 

Page 13

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

    Mexican pesos
 (thousands)
    Mexican pesos
(thousands)
    US dollars
(thousands)
 
    Undiscounted     Discounted        
At January 1, 2019     121,865       87,917     $ 4,475  
Advances received     97,601       72,897       3,676  
Accretion during the year           21,886       1,104  
Foreign exchange                 392  
At December 31, 2019     219,466       182,700     $ 9,647  
Accretion year to date           21,134       974  
Modification gains arising from changes in estimates           (22,093 )     (1,019 )
Foreign exchange                 (1,509 )
At September 30, 2020     219,466       181,741     $ 8,093  

 

11. SITE CLOSURE PROVISIONS

 

    Camino Rojo
Project
    Cerro Quema
Project
    Total  
At December 31, 2019   $ 232     $ 343     $ 575  
At September 30, 2020   $ 215     $ 343     $ 558  

 

12. INTEREST AND FINANCE COSTS

 

    Three months ended
September 30
    Nine months ended
September 30
 
    2020     2019     2020     2019  
Accretion on Camino Rojo project loan (note 9)   $ 646     $     $ 1,950     $  
Accretion on Newmont loan (note 10)     917       481       974       805  
Interest expense on leases     1       2       4       3  
Interest income     (61 )     (16 )     (210 )     (85 )
    $ 1,503     $ 467     $ 2,718     $ 723  

 

13. SHARE CAPITAL

 

(a) Issued share capital

 

On April 3, 2020, the Company closed an equity financing of 36,600,000 common shares at a price of C$2.05 per common share for aggregate gross proceeds to the Company of C$75,030,000 ($54,959,000).

 

During the nine months ended September 30, 2020, the Company issued:

 

· 2,013,050 common shares pursuant to the exercise of warrants for proceeds of $2,806,000 (note 13(b)).

· 1,837,103 common shares pursuant to the exercise of stock options for proceeds of $1,689,000 (note 14(a)).

· 414,060 common shares pursuant to the vesting of RSUs (note 14(b)).

· 1,000,000 common shares pursuant to the vesting of bonus shares (note 14(d)).

 

Page 14

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – 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
2019
    Issued     Exercised     September 30
2020
 
February 15, 2021   C$ 2.35       8,790,600             (963,050 )     7,827,550  
July 8, 2021   C$ 0.62       570,000             (200,000 )     370,000  
June 12, 2022   C$ 1.65       5,842,500             (850,000 )     4,992,500  
November 7, 2022   C$ 1.40       3,000,000                   3,000,000  
December 18, 2026   C$ 3.00       32,500,000                   32,500,000  
Total number of warrants             50,703,100             (2,013,050 )     48,690,050  
                                         
Weighted average exercise price           C$ 2.61           C$ 1.88     C$ 2.64  

 

14. SHARE-BASED PAYMENTS

 

The Company has four different forms of share-based payments for eligible recipients – stock options, restricted share units (“RSUs”), deferred share units (“DSUs”), and bonus shares.

 

Share based payments expense   Three months ended
September 30
    Nine months ended
September 30
 
    2020     2019     2020     2019  
Stock options   $ 554     $ 246     $ 1,330     $ 1,251  
Restricted share units     151       122       410       296  
Deferred share units           85       218       275  
Bonus shares           127       131       373  
Share based payments expense   $ 705     $ 580     $ 2,089     $ 2,195  

 

Page 15

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

  

(a) Stock options

 

Stock options outstanding

 

  Number     Weighted
average
exercise price
 
As at January 1, 2019     9,124,005     C$ 1.23  
Granted     2,199,322       1.08  
Exercised     (1,358,491 )     1.16  
Expired or cancelled     (47,500 )     1.48  
As at December 31, 2019     9,917,336       1.20  
Granted     2,233,438       2.91  
Exercised     (1,837,103 )     1.23  
Expired, forfeited or cancelled     (78,744 )     1.17  
As at September 30, 2020     10,234,927     C$ 1.57  
                 
Vested, December 31, 2019     7,229,622     C$ 1.22  
Vested, September 30, 2020     7,715,687     C$ 1.37  

 

The options granted during the nine months ended September 30, 2020 had an aggregate grant date fair value of $2,015,000 (C$2,729,000) which was determined using a Black Scholes option pricing model with the following assumptions:

 

· Expected volatility 48%, expected life 5 years, Canadian dollar risk free interest rate 0.5%, dividends nil.

 

The options granted during the nine months ended September 30, 2019 had an aggregate grant date fair value of $737,000 (C$932,000) which was determined using a Black Scholes option pricing model with the following weighted average assumptions:

 

· expected volatility 50%, expected life 5 years, Canadian dollar risk free interest rate 1.5%, dividends nil.

  

Subsequent to the reporting period, 175,000 stock options were exercised, for gross proceeds to the Company of $19,980.

 

(b) Restricted Share Units

 

Number of RSUs outstanding:   Total     Number vesting in the year  
    number     2020     2021     2022     2023  
Outstanding, December 31, 2019     1,014,972       365,882       365,880       283,210        
Awarded during the period     320,447             106,818       106,815       106,814  
Settled or cancelled during the period     (414,063 )     (365,882 )     (24,091 )     (24,090 )      
Outstanding, September 30, 2020     921,356             448,607       365,935       106,814  

 

RSUs are valued based on the closing price of the Company’s common shares immediately prior to award.

 

Page 16

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

(c) Deferred Share Units

 

DSUs outstanding:      
    Number  
Outstanding, December 31, 2019     508,780  
Awarded     135,745  
Outstanding, September 30, 2020     644,525  

 

DSUs are valued based on the closing price of the Company’s common shares immediately prior to award.

 

(d) Bonus shares

 

Bonus shares outstanding:      
    Number  
Outstanding, December 31, 2019     1,500,000  
Vested and issued during the period     (1,000,000 )
Outstanding, September 30, 2020     500,000  
Vested, September 30, 2020     500,000  

 

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 are subject to a vesting period from June 19, 2017 to June 18, 2020 (the “Eligibility Period”). If the non-executive Chairman ceases to be the director of the Company before the Eligibility Period ends, the bonus shares will be forfeited. The bonus shares will become issuable (1) after the Eligibility Period on the date that the non-executive Chairman ceases to act as a director of the Company, or (2) upon a change of control of the Company.

 

We estimated the fair value of the bonus shares ($1.31 each) based on the market price of the common shares at the date of the grant. The amount of $655,000 was recognized on a straight line basis over the Eligibility Period.

 

On November 13, 2018, the Board of Directors awarded 1,000,000 bonus shares to an officer of the Company. The bonus shares were structured in four tranches of 250,000 bonus shares each, vesting and issuable upon the achievement of certain share price thresholds particular to each tranche. Upon initial recognition we estimated the dates that each of these market condition tranches would vest, such dates ranging from December 2019 to March 2022. The award date fair value ($537,000, or $0.537 per bonus share) is recognized on a straight line basis over the estimated vesting periods. During the three months ended June 30, 2020, two of these tranches vested and the bonus shares were issued. The third and fourth tranches of 250,000 each vested during the three months ended September 30, 2020 and the bonus shares were issued. Consequently, the total fair value has been recognized as at September 30, 2020.

 

15. 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, and members of the Board of Directors of the Company.

 

Page 17

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – 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
September 30
    Nine months ended
September 30
 
    2020     2019     2020     2019  
Short term incentive plans                                
Salaries   $ 197     $ 314     $ 929     $ 945  
Directors’ fees     43       45       127       114  
      240       359       1,056       1,059  
Share based payments     271       531       1,390       1,801  
Total   $ 511     $ 890     $ 2,446     $ 2,860  

 

(b) Transactions

 

The Company had no other material transactions with related parties, other than with key management personnel as described above, during the three and nine months ended September 30, 2020, or during the year ended December 31, 2019.

 

(c) Outstanding balances at the Reporting Date

 

At September 30, 2020, estimated accrued short term incentive compensation to key management personnel totaled $403,000 and was included in accrued liabilities (December 31, 2019 – $540,000).

 

16. SUPPLEMENTAL CASH FLOW INFORMATION

 

(a) Non-cash activities

 

The non-cash investing and financing activities of the Company include the following:

 

    Three months ended
September 30
    Nine months ended
September 30
 
    2020     2019     2020     2019  
Financing activities                                
Stock options exercised, credited to share capital with an offset to reserves     1,174       329       1,352       329  
Warrants exercised, credited to share capital with an offset to reserves     228       1,402       499       1,535  
Shares issued on maturity of RSUs, credited to share capital with offset to reserves     46       5       335       167  
Shares issued on vesting of bonus shares, credited to share capital with offset to reserves     36             394        

 

Page 18

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

(b) Cash and cash equivalents

 

Cash consists of the following:

 

    September 30,
2020
    September 30,
2019
 
Bank current accounts and cash on hand   $ 41,743     $ 3,876  

 

17. SEGMENT INFORMATION

 

(a) Reportable segments

 

The operating 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 the Panamanian projects, the Mexican projects, and the corporate office. The projects are each managed by a dedicated General Manager and management team. Additionally, the corporate office oversees the plans and activities of early stage exploration projects, such as the Monitor Gold project.

 

None of these segments yet generate revenue from external customers, and each of the projects are focused on the exploration and evaluation of mineral properties.

 

(b) Geographic segments

 

We conduct our activities in four geographic areas: Mexico, Panama, the United States, and Canada.

 

    Mexico     Panama     USA     Canada     Total  
At September 30, 2020                                        
Equipment   $ 159     $ 32     $     $ 64     $ 255  
Exploration and evaluation assets     36,180       82,429       314             118,923  

 

    Mexico     Panama     USA     Canada     Total  
At December 31, 2019                                        
Equipment   $ 140     $ 48     $     $ 96     $ 284  
Exploration and evaluation assets     42,900       82,429       314             125,643  

 

18. CAPITAL MANAGEMENT

 

Our objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue the exploration, evaluation, and development of our mineral properties and to maintain a flexible capital structure. In the management of capital, we include long term loans and share capital.

 

There was no change to our policy for capital management during the three and nine months ended September 30, 2020.

 

We manage our capital structure and adjust it in light of 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, acquire or dispose of assets, or adjust the amount of cash and short-term investments. To maximize ongoing development efforts, we do not currently pay dividends.

 

Page 19

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

At the end of 2019, we entered into a Credit Facility (note 9) in respect of the Camino Rojo project pursuant to which we have drawn $25 million of a total available $125 million. The Credit Facility requires us to maintain a minimum working capital of $5 million.

 

Our investment policy is to invest the Company’s excess cash in low risk financial instruments such as term deposits and higher yield savings accounts with major Canadian banks. By using this strategy, the Company preserves its cash resources and is able to marginally increase these resources through the yields on these investments. Our financial instruments are exposed to certain financial risks, which include currency risk, credit risk, liquidity risk and interest rate risk.

 

Our ability to carry out our long-range strategic objectives in future years depends on our ability to generate positive cash flows from our mining operations and to raise financing from lenders, shareholders, and other investors. We continue to regularly review and consider financing alternatives to fund the Company’s ongoing exploration and development activities.

 

19. 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. We have no financial assets or liabilities included in Level 3 of the hierarchy.

 

Page 20

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

At September 30, 2020, 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
    Fair value  
Financial assets                                                    
Cash and cash equivalents   FVTPL   $ 41,743     $ 41,743     $     $           —     $          —     $ 41,743  
Accounts receivable   Amortized cost     64                         64       64  
Restricted funds   Amortized cost     383             383                   383  
        $ 42,190       41,743     $ 383     $     $ 64     $ 42,190  
                                                     
Financial liabilities                                                    
Trade payables   Amortized cost   $ 964     $     $     $     $ 964     $ 964  
Lease obligation   Amortized cost     47             47                   47  
Camino Rojo project loan   Amortized cost     13,445             13,445                   25,000  
Newmont loan   Amortized cost     8,093             8,093                   8,538  
        $ 22,549     $     $ 21,585     $     $ 964     $ 34,549  

 

The fair value of the Newmont loan at September 30, 2020 was estimated at $8.5 million using an exchange rate of 22.4573 MXN/USD and a discount rate of 10.6%.

 

At December 31, 2019, 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
    Fair value  
Financial assets                                                    
Cash and cash equivalents   FVTPL   $ 23,106     $ 23,106     $     $         —     $          —     $ 23,106  
Accounts receivable   Amortized cost     18                         18       18  
Restricted funds   Amortized cost     509             509                   509  
        $ 23,633       23,106     $ 509     $     $ 18     $ 23,633  
                                                     
Financial liabilities                                                    
Trade payables   Amortized cost   $ 802     $     $     $     $ 802     $ 802  
Lease obligation   Amortized cost     67                         67       67  
Camino Rojo project loan   Amortized cost     12,961             12,961                   12,961  
Newmont loan   Amortized cost     9,647             9,647                   9,647  
        $ 23,477     $     $ 22,608     $     $ 869     $ 23,477  

 

Our policy is to recognize transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

 

Page 21

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

20. COMMITMENTS AND CONTINGENCIES

 

(a) Commitments

 

During the period ended September 30, 2020, the Company issued purchase orders for long lead equipment necessary for the construction of the Camino Rojo mine. At September 30, 2020, these outstanding purchase orders and contracts totaled approximately $47,300,000 (December 31, 2019 – $2,483,000), which we expect will be filled within the next 12 months.

 

In the event of a change in control, the Company is committed to severance payments amounting to approximately $2,860,000 (December 31, 2019 – $2,020,000) to certain officers and management. No amounts have been recorded in these consolidated financial statements to reflect such severance payments.

 

(b) Litigation

 

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 adverse effect on our consolidated financial position, results of operations or cash flows.

 

21. EVENTS AFTER THE REPORTING PERIOD

 

(a) Share Issuances

 

Subsequent to the reporting period, the Company drew on the second tranche of the Camino Rojo project loan (note 9) and issued common shares from the exercise of stock options (note 14(a)).

 

Page 22

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

22. EFFECT OF THE CHANGE IN PRESENTATION CURRENCY

 

The effects of the change in presentation currency discussed in note 3 above were as follows.

 

(a) Effect on the consolidated balance sheets as at December 31, 2019 and January 1, 2019

 

    December 31, 2019     January 1, 2019  
    USD     CAD     USD     CAD  
ASSETS                                
Current assets                                
Cash and cash equivalents   US$ 23,106     C$ 30,009     US$ 12,234     C$ 16,686  
Accounts receivable     94       122       282       385  
Prepaid expenses     53       64       151       206  
      23,253       30,195       12,667       17,277  
Restricted funds     509       662       150       205  
Value added taxes recoverable     1,340       1,747       622       849  
Equipment     284       370       252       344  
Exploration and evaluation assets     125,643       163,383       124,099       169,282  
TOTAL ASSETS   US$ 151,029     C$ 196,357     US$ 137,790     C$ 187,957  
                                 
LIABILITIES                                
Current liabilities                                
Trade and other payables   US$ 802     C$ 1,042     US$ 1,278     C$ 1,743  
Accrued liabilities     1,578       2,049       1,405       1,916  
      2,380       3,091       2,683       3,659  
Lease obligations     44       57              
Camino Rojo project loan     12,961       16,833              
Newmont loan     9,647       12,573       4,475       6,103  
Accrued liabilities – long term     261       338              
Site closure provisions     575       748       626       745  
TOTAL LIABILITIES     25,868       33,640       7,784       10,507  
                                 
SHAREHOLDERS' EQUITY                                
Share capital     159,230       208,186       153,852       201,077  
Reserves     30,061       39,348       19,931       25,960  
Accumulated other comprehensive income (loss)     (1,027 )     (1,036 )     (3,393 )     4,797  
Accumulated deficit     (63,103 )     (83,781 )     (40,384 )     (54,384 )
TOTAL SHAREHOLDERS' EQUITY     125,161       162,717       130,006       177,450  
                                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   US$ 151,029     C$ 196,357     US$ 137,790     C$ 187,957  

 

Page 23

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2020 and 2019

(Unaudited – United States dollars, unless otherwise stated. All currency figures in tables are in thousands, except per-share amounts)

 

(b) Effect on the consolidated statement of loss and comprehensive loss for the nine months ended September 30, 2019

 

    Nine months ended
September 30, 2019
 
    USD     CAD  
EXPLORATION AND EVALUATION EXPENSES                
Assays and analysis   US$ 160     C$ 213  
Drilling     1,021       1,358  
Geological     1,260       1,675  
Engineering     1,500       1,993  
Environmental     530       706  
Community and government     1,353       1,867  
Land and water use, claims and concessions     3,286       4,302  
Project management     131       174  
Project review     115       153  
Site activities     1,265       1,682  
Site administration     1,264       1,679  
      11,885       15,802  
                 
GENERAL AND ADMINISTRATIVE EXPENSES                
Office and administrative     381       506  
Professional fees     374       496  
Regulatory and transfer agent     95       126  
Salaries and benefits     1,256       1,670  
      2,106       2,798  
                 
OTHER EXPENSES (INCOME)                
Depreciation     72       96  
Share based payments     2,195       2,918  
Interest and finance costs     723       961  
Foreign exchange loss (gain)     19       27  
      3,009       4,002  
                 
LOSS FOR THE YEAR   US$ 17,000     C$ 22,602  
                 
OTHER COMPREHENSIVE LOSS (INCOME)                
Items that may in future periods be reclassified to profit or loss:                
Foreign currency differences arising on translation of foreign operations     (305 )     4,805  
TOTAL COMPREHENSIVE LOSS   US$ 16,695     C$ 27,407  
                 
                 
Weighted average number of common shares outstanding (millions)     181.4       181.4  
                 
Loss per share - basic and diluted   US$ 0.09     C$ 0.12  

 

Page 24

 

 

Exhibit 99.03

 

 

 

Management’s Discussion and Analysis

 

Three and nine months ended September 30, 2020

 

 

Amounts in United States dollars

 

 

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020   United States dollars unless otherwise stated

 

I.            Overview

 

Orla Mining Ltd. is a mineral exploration and development company which trades on the Toronto Stock Exchange under the ticker symbol OLA. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries.

 

Our corporate strategy is to acquire, develop and operate mineral properties where our expertise can substantially increase shareholder value. We have two material gold projects with near-term production potential based on open pit mining and heap leaching – the Camino Rojo Oxide Gold Project located in Zacatecas State, Mexico, and the Cerro Quema Gold Project located in Los Santos Province, Panama.

 

This Management’s Discussion and Analysis (“MD&A”) of the financial condition and results of operations of the Company should be read in conjunction with our condensed consolidated interim financial statements for the quarter end September 30, 2020. You can find additional information regarding the Company, including our Annual Information Form, on SEDAR1 under the Company’s profile at www.sedar.com.

 

All monetary amounts herein are expressed in United States dollars ($ or US$) unless otherwise stated. C$ refers to Canadian dollars.

 

This MD&A is current as of November 12, 2020.

 

Hans Smit, P.Geo, is the Qualified Person, as the term is defined in National Instrument 43-101 (“NI 43-101”). He has reviewed and approved the technical information disclosed in this MD&A.

 

II.            HIGHLIGHTS

 

During the quarter ended September 30, 2020, and to the date of this MD&A:

 

A. CAMINO ROJO OXIDE PROJECT DEVELOPMENT

 

· During the quarter, the Company’s Environmental Impact Statement (“Manifestos de Impacto Ambiental” or “MIA”) was granted approval from the Mexican Federal Environmental Department ("SEMARNAT") for the development of the Camino Rojo Oxide Gold Project (“Camino Rojo”) located in Zacatecas State, Mexico.

 

· Current construction activities include mobilization of the earthworks contractor, installation of the construction camp and offices, drilling water wells and site fence erection. The power line to site has been approved by the federal electricity commission and construction is currently underway ahead of schedule.

 

· The next phase of construction will be the earthworks. As a condition of the MIA, Orla submitted a Technical Economic Study to SEMARNAT on August 27, 2020. SEMARNAT is reviewing this Technical Economic Study, and upon acceptance, they will determine the amount of the environmental bond required to be placed. Earthworks can commence once we place the required environmental bond.

 

· At September 30, 2020, detailed engineering was 87% complete and amounts committed for equipment and contracts totaled $77 million to date.

 

· Major contracts for earth moving and civil works have been awarded. Earthworks can start once the required environmental bond is in place.

 

· Process plant equipment, including crusher and conveyors, is expected to start arriving on site in November 2020.

 

 

1 SEDAR is the System for Electronic Document Analysis and Retrieval, a filing system operated by the Canadian Securities Administrators, accessible at: www.sedar.com

 

Page 2

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020   United States dollars unless otherwise stated

 

B. Financing and Corporate

 

· The receipt of the MIA satisfied one of the key conditions precedent to the drawdown of the remaining $100 million available on the previously announced $125 million project finance facility (“Credit Facility”).

 

· Cash and cash equivalents balance on September 30, 2020 of $42 million.

 

· Drawdown of $50 million for the second tranche of the Credit Facility occurred on October 30, 2020.

 

· Appointed Sean Spraggett as the General Manager, Panama, in July 2020.

 

· Appointed Sylvain Guerard as the Senior Vice President, Exploration, in August 2020.

 

C. Exploration and Other Project Development

 

· A trenching program was completed in Mexico during the third quarter while a 6,000-meter reverse circulation (“RC”) drill program is 50% complete. Drilling will continue in the fourth quarter. A geophysics program consisting of 238 kilometres (“km”) of induced polarization (“IP”) lines was started and will continue in the fourth quarter.

 

· In Panama, the Company continued work on the Cerro Quema Pre-Feasibility Study update. Specific ongoing workflows include resource modelling, process and metallurgy design, geotechnical drilling, hydrology testing, and environmental study and review. The geotechnical drilling to support the study began during the third quarter.

 

· A regional exploration drilling program in Panama is planned for the fourth quarter and will focus on the areas of La Pelona, Sombrero, Idaida and Caballito. Resource work continues on the Caballito copper-gold discovery.

 

COVID-19 Global health emergency

 

The global outbreak of the novel coronavirus (“COVID-19”) in 2020 has had a significant impact on businesses through restrictions put in place by governments around the world, including the jurisdictions in which we conduct our business. Our activities have been restricted by government orders related to, among others, travel, business operations, and stay-at-home orders. As of the date of this MD&A, it is not possible to determine the extent of the impact that this global health emergency will have on our activities as the impacts will depend on future developments which themselves are highly uncertain and cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, its extent and intensity, the duration of the outbreak, and possible government, societal, and individual responses to the situation.

 

On March 20, 2020, Orla suspended all activities at the Camino Rojo and Cerro Quema projects due to government mandated stay-at-home orders issued in response to the COVID-19 Global Health Emergency. Both operations have established COVID-19 committees that meet regularly to discuss operational protocols and safety measures and update as necessary.

 

Authorization to resume activities at Camino Rojo was received from the Mexican health authorities on May 23, 2020 after a plan was presented and all requirements had been met for a safe return to work. Government offices have resumed reviewing permit applications, although at a reduced capacity. Procurement and detailed engineering work continue on a remote basis. However, should there be changes to the current situation, our construction schedule and consequently our timing to production may be affected.

 

Page 3

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020        United States dollars unless otherwise stated

 

On June 1, 2020, the Panamanian government announced Block 2 of re-opening, which includes the mining industry. We submitted COVID-19 protocols for the re-opening of site operations and on July 8, 2020 we received approval from the Ministry of Health of Panama for a gradual re-opening of activities. In September 2020 the government moved to Block 4 of its reopening plan, lifting in-country travel restrictions, allowing hotels to open and domestic air travel. On October 12, 2020 international travel resumed. Exploration activities restarted in September 2020 and drilling started in October.

 

Return-to-work plans and protocols have been implemented at Cerro Quema, Panama, and Camino Rojo, Mexico, and approved by the health authorities. The Company has implemented strict COVID-19 protocols, including rigorous screening and testing programs at the site operations.

 

We continue to maintain robust organization-wide COVID-19 prevention protocols to support the health of our employees and local communities. Orla is closely monitoring the potential impacts from the pandemic on areas including equipment delivery and logistics, construction costs and schedule, as well as community and government relations.

 

III.            OUTLOOK AND UPCOMING MILESTONES

 

We remain focused on advancing the Company’s strategic objectives and near-term milestones, which include the following:

 

· Continue to maintain robust organization-wide COVID-19 prevention protocols to support the health of our employees and local communities.

 

· Continue safe and controlled mobilization at Camino Rojo as part of project construction.

 

· Complete Layback Agreement with Fresnillo for the Camino Rojo Oxide Project.

 

· Advance exploration programs at Camino Rojo and Cerro Quema.

 

· Progress Camino Rojo Sulphide Project studies.

 

· Update the Pre-Feasibility Study at Cerro Quema Oxide Project.

 

· Release a maiden mineral resource estimate for the Caballito discovery at Cerro Quema in Panama.

 

IV.            DISCUSSION OF OPERATIONS

 

A. Camino Rojo, Mexico

 

Project Description and History

 

The Camino Rojo Project lies 190 km NE of the city of Zacatecas, 48 km S-SW of the town of Concepcion del Oro, and 54 km S-SE of Newmont Corporation’s (“Newmont”) Peñasquito Mine and consists of seven concessions covering in aggregate 163,127 hectares. Camino Rojo is comprised of a near-surface oxide gold and silver deposit, a deeper sulphide zone containing gold, silver, zinc and lead mineralization, and a large area with untested exploration potential.

 

Page 4

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020        United States dollars unless otherwise stated

 

Canplats Resources Corporation (“Canplats”) initially discovered gold-silver mineralization at Camino Rojo in 2007, and subsequently completed 39,725 metres of drilling, largely delineating the shallow oxide mineralization. Canplats also carried out metallurgical studies prior to being acquired by Newmont in 2010. Newmont then completed more than 250,000 metres of drilling, conducted airborne and ground geophysical surveys, did extensive geological and mineralogical investigations, and conducted numerous metallurgical studies, which included detailed mineralogical studies, column leach tests on oxide material, size fraction analysis, variability test work and sulphide flotation studies.

 

The Ejido San Tiburcio holds the surface rights over the main area of known mineralization. Exploration has been carried out under the authority of agreements between the project operators and the Ejido San Tiburcio. There is a 30-year temporary occupation agreement in place with the Ejido San Tiburcio, with the right to expropriate, covering all the area of the mineral resource and area of potential development described in the “Feasibility Study, NI 43-101 Technical Report on the Camino Rojo Gold Project Municipality of Mazapil, Zacatecas, Mexico” dated effective June 25, 2019 (the “Camino Rojo Report”). Other temporary occupation agreements allow surface access for exploration activities in various other parts of the concession package. The Company has water rights in the area of the proposed development.

 

In November 2017, we acquired the Camino Rojo Project from Goldcorp Inc.1 (now, “Newmont”). A 2% net smelter return royalty on the sale of all metal production from the oxide material at Camino Rojo (the “Oxide Royalty”) was granted to Newmont as part of the acquisition.

 

The Company and Newmont also entered into an option agreement regarding the potential development of sulphide operations at Camino Rojo. Pursuant to the option agreement, Newmont will, subject to the applicable sulphide project meeting certain thresholds, have an option to acquire a 60% or 70% interest in the applicable sulphide project (“Sulphide Option”). Where Newmont decides not to exercise its Sulphide Option, a 2% net smelter return royalty will be granted on metal production from sulphide material (the “Sulphide Royalty”). On September 21, 2020, Newmont announced that it had entered into an agreement to sell the Oxide Royalty. Orla maintains a right of first refusal on the Oxide Royalty which expires on December 20, 2020.

 

The Company has full rights to explore, evaluate, and exploit the property. However, if sulphide projects are defined through one or more positive pre-feasibility studies with development scenarios either (i) exceeding 500 million tonnes of proven and probable reserves developed as a standalone operation, or (ii) using the existing infrastructure at the Peñasquito mine, Newmont would have an option to enter into a joint venture with Orla at a 60% or 70% level, respectively, for the purpose of future exploration, advancement, construction, and exploitation of such a sulphide project. Upon meeting one of the development scenario criteria, if Newmont then chooses to exercise its option, Orla’s share of the costs to develop a sulphide project would be, at Orla’s option, carried to production by Newmont. If Newmont acquires a portion of a sulphide project in the future through the exercise of its option, Orla will retain a right of first refusal on the future sale by Newmont of any portion of that sulphide project. The Camino Rojo Asset Purchase Agreement was filed on SEDAR on June 28, 2017. Details of the joint venture are available in our news release dated November 7, 2017, which is available here.

 

On June 24, 2019, we issued the results of a positive Feasibility Study along with a mineral reserve estimate on the Camino Rojo Oxide Gold Project. The Feasibility Study supports a technically simple open-pit mine and heap-leach operation with low capital and operating costs providing rapid payback and a strong financial return. An independent technical report prepared in accordance with the requirements of NI 43-101 is available at www.sedar.com under Orla's profile and on our website at www.orlamining.com.

 

 

1 Goldcorp Inc. is a predecessor company to Newmont, prior to April 18, 2019. Newmont is a publicly traded company resulting from the combination of Newmont Mining Corporation and Goldcorp Inc., effective April 18, 2019.

 

Page 5

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020        United States dollars unless otherwise stated

 

Camino Rojo Feasibility Study

 

The Camino Rojo Feasibility Study considers near-surface open pit mining of 44.0 million tonnes of oxide and transitional ore at a throughput rate of 18,000 tonnes per day for an average life of mine gold production of 97,000 ounces annually. 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 project simplicity, low initial capital of $123 million and low estimated all-in sustaining cost (“AISC”) of $576 per ounce of gold.

 

The 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"), Barranca Group LLC, Piteau Associates Engineering Ltd., and HydroGeoLogica Inc. (“HGL”).

 

The 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 64% 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. Capital costs were estimated using budgetary supplier quotes for all major and most minor equipment as well as contractor quotes for major construction contracts.

 

The proposed mine is located 3 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. Orla has all surface, mineral and water rights required to develop the project as presented in the Feasibility Study and existing wells produce in excess of the average 24 litres per second of water required for the project.

 

There are no residents within the area of proposed development. The town of San Tiburcio is located 4 kilometres to the east of the proposed development. Orla has a Collaboration and Social Responsibility Agreement with the Ejido San Tiburcio and a 30-year temporary occupation agreement with an expropriation right over the 2,497 hectares covering the proposed pit and infrastructure area. Orla has an active community and social program in San Tiburcio and other nearby communities of El Berrendo and San Francisco de los Quijano.

 

Government review of the documents required to obtain an operating permit was delayed by COVID-19 closures and the final permit was received in August 2020. The approval of the MIA is conditional upon Orla meeting certain customary conditions and standard requirements, which the Company has completed and submitted to SEMARNAT and is awaiting confirmation. Orla now has the two principal permits necessary and construction activities that do not involve significant ground disturbance have been initiated. Current construction activities include mobilization of the earthworks contractor, installation of the construction camp and offices, drilling water wells and site fence erection. The power line to site has been approved by the federal electricity commission and construction is currently underway. Detailed engineering is nearly complete. Procurement remains on track and we expect first gold production in the fourth quarter of 2021.

 

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 were considered in the Feasibility Study for heap leach extraction.

 

Page 6

 

 

ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020        United States dollars unless otherwise stated

 

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, and are accessible from, Orla's concessions and support the 6.8-year mine life.

 

The mineral reserve estimate at Camino Rojo includes proven and probable mineral reserves of 44.0 million tonnes at a gold grade of 0.73 grams per tonne ("g/t") and a silver grade of 14.2 g/t, for total mineral reserves of 1.03 million ounces of gold and 20.1 million ounces of silver. All mineral reserves are contained and accessible from within Orla's mineral concessions.

 

Mineral Resources

 

As part of the Feasibility Study efforts, IMC updated the mineral resource estimate from the previous estimate prepared as of April 27, 2018 and previously reported in Orla's May 29, 2018 news release. Mineral resources were divided between oxide and transitional material that could possibly be extracted by open pit mine and processed in a heap leach operation ("Leach Resource") and sulphide material that could possibly be extracted by open pit and processed in a mill ("Mill Resource"). For the Mill Resource, estimates were made for contained gold, silver, lead, and zinc. As lead and zinc would not be recovered in a heap leach operation, only gold and silver were estimated for the Leach Resource.

 

Updated measured and indicated mineral resources, inclusive of mineral reserves, amount to 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.

 

The mineral reserve and resource estimate for Camino Rojo is available in the Company’s Annual Information Form which was filed on SEDAR on March 23, 2020, and is also accessible on the Company’s website at www.orlamining.com. All the mineralization comprised in Orla’s mineral resource estimate with respect to the Camino Rojo Project is contained on mineral titles controlled by Orla. However, the mineral resource estimate assumes that the north wall of the conceptual floating pit cone used to demonstrate reasonable prospects for eventual economic extraction extends onto lands where mineral title is held by Fresnillo and that waste would be mined on Fresnillo’s mineral titles. Any potential development of the Camino Rojo Project that includes an open pit encompassing the entire mineral resource estimate would be dependent on executing the Layback Agreement with Fresnillo, which addresses the oxide and transition portion of the mineral resources that are amendable to heap leaching, and a subsequent agreement addressing the sulphide mineral resources that are not amendable to heap leaching. It is estimated that approximately two-thirds of the mineral resource estimate is dependent on the proposed Layback Agreement and a subsequent agreement being obtained with Fresnillo.

 

The Feasibility Study in the Camino Rojo Report was based on only a portion of the total mineral resource estimate and was prepared on the assumption that no mining activities would occur on Fresnillo’s mineral titles. Accordingly, delays in, or failure to obtain, the Layback Agreement with Fresnillo to conduct mining operations on its mineral titles would have no impact on the timetable or cost of development of the potential mine modelled in the Camino Rojo Report.

 

Additional details on mineral reserve and resource assumptions, risks and data verification can be found in the independent technical report dated June 25, 2019 prepared in accordance with the requirements of NI 43-101 and available at www.sedar.com under Orla's profile and on the Company’s website at www.orlamining.com.

 

Layback Agreement

 

On March 23, 2020, Orla announced that it had entered into a non-binding letter agreement with Fresnillo as to the commercial terms on which the Corporation would obtain the right to expand the oxide pit at the Camino Rojo Project onto part of Fresnillo’s mineral concession located immediately to the north of Orla’s property under a proposed Layback Agreement. The proposed Layback Agreement will allow access to oxide and transitional heap leachable mineral resources on Orla’s property below the open pit outlined in the Camino Rojo Report. In addition, the Layback Agreement will provide 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 are within an expanded open pit.

 

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ORLA MINING LTD.

Management’s Discussion and Analysis

Three and nine months ended September 30, 2020        United States dollars unless otherwise stated