Orla Mining (TSX:OLA,NYSEAMERICAN:ORLA) has entered into a definitive deal to buy the Musselwhite gold mine from Newmont (TSX:NGT,NYSE:NEM), positioning the company to more than double its annual gold production.
The purchase, valued at US$810 million, with two additional contingent payments of US$20 million each, will set Orla up as a diversified North American gold producer as it marks the company's entry into Canada.
The first contingent payment will be made if the spot gold price exceeds US$2,900 per ounce in the first year after the transaction closes, and the second will be made if the price exceeds US$3,000 in the second year after closure.
Financing will involve cash reserves, debt facilities, a gold prepay arrangement and convertible notes, with no upfront equity dilution for shareholders. The deal requires shareholder approval under Canadian regulations due to Newmont's status as a related party. A special meeting of Orla shareholders to finalize the transaction is planned for January 2025.
Musselwhite, which is located on the shore of Opapimiskan Lake in Northwestern Ontario, Canada, has been in operation for over 25 years and has produced nearly 6 million ounces of gold to date.
As mentioned, the purchase is expected to double Orla’s annual gold production to over 300,000 ounces, with potential growth to 500,000 ounces per year by 2027 following the completion of the South Railroad project in Nevada, US.
The mine's proven and probable reserves currently stand at 1.5 million ounces of gold, while its processing plant operates below capacity, leaving room for increased output through exploration and operational adjustments.
Jason Simpson, Orla's president and CEO, said the company plans to explore the mine’s 65,000 hectare concession area for new deposits and expand reserves beyond the estimated seven year mine life.
“We have been impressed with the operating team at Musselwhite, which runs an exceptional mine and has developed positive and strong ties with First Nations, local partners, and community members. We are fully committed to respecting and growing these relationships,” Simpson added in a Monday (November 18) statement.
Musselwhite will complement Orla's existing assets in Mexico and the US. The company believes this geographic diversification will strengthen its position as a North America-focused mid-tier gold producer.
Orla said it intends to eventually put Musselwhite's underutilized processing facility to work, noting that current annual throughput stands at 1 million metric tons versus a capacity of 1.5 million metric tons.
Musselwhite is projected to contribute average annual free cashflow of US$150 million over the next six years. When combined with cashflow from Camino Rojo, the company believes it will be able to self-fund its growth pipeline.
For Newmont, the Musselwhite sale is part of a broader divestment strategy, bringing total expected gross proceeds from asset sales to US$2.9 billion. The firm is looking to optimize its portfolio and reallocate resources to its core assets.
Newmont began its divestments in February of this year. It notes in a statement that it is committed to responsible asset transitions and expresses confidence in Orla’s ability to manage Musselwhite effectively.
The acquisition is anticipated to close shortly after Orla's special shareholder meeting in January 2025. Orla plans to provide detailed transaction documentation to shareholders in December of this year.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
