EX-99.1 2 tm2324722d1_ex99-1.htm EXHIBIT 99.1

 

Exhibit 99.1

 

 

 

Condensed Interim Consolidated Financial Statements

 

Three and nine months ended September 30, 2023 and 2022

 

Presented in United States dollars

 

 

 

 

ORLA MINING LTD.

Condensed Interim Consolidated Balance Sheets

(Unaudited - thousands of United States dollars)

 

As at  September 30,
2023		   December 31,
2022		 
ASSETS          
Current assets          
Cash and cash equivalents  $132,757   $96,278 
Trade and other receivables   377    365 
Value added taxes recoverable (note 10)   6,769    8,659 
Inventory (note 9)   28,571    22,446 
Prepaid expenses   5,321    2,824 
Restricted cash   —    2,290 
    173,795    132,862 
Restricted cash   1,008    1,142 
Value added taxes recoverable (note 10)   5,172    5,229 
Long term inventory (note 9)   5,245    4,096 
Property, plant and equipment (note 11)   214,352    224,416 
Exploration and evaluation properties (note 12)   242,743    242,743 
Deferred tax asset   4,376    2,405 
Other non-current assets   1,043    923 
TOTAL ASSETS  $647,734   $613,816 
           
LIABILITIES          
Current liabilities          
Trade payables and accrued liabilities (note 13)  $21,821   $19,675 
Current portion of long term debt (note 14)   22,800    45,000 
Taxes payable   15,104    33,102 
    59,725    97,777 
Lease obligations (note 15)   2,166    2,327 
Long term debt (note 14)   113,350    100,795 
Deferred revenue   8,053    7,500 
Site closure provisions (note 16)   7,321    8,261 
Other long term liabilities   409    172 
TOTAL LIABILITIES   191,024    216,832 
           
SHAREHOLDERS' EQUITY          
Share capital (note 17)   473,518    445,316 
Reserves   23,964    24,009 
Accumulated other comprehensive loss   (1,446)   (1,583)
Accumulated deficit   (39,326)   (70,758)
TOTAL SHAREHOLDERS' EQUITY   456,710    396,984 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $647,734   $613,816 

 

  /s/ Jason Simpson   /s/ Elizabeth McGregor  
  Jason Simpson, Director   Elizabeth McGregor, Director  

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

Page 2

 

 

ORLA MINING LTD.

Condensed Interim Consolidated Statements of Income and Comprehensive Income

(Unaudited - thousands of United States dollars)

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
REVENUE (note 4)  $60,294   $49,030   $170,697   $136,472 
                     
COST OF SALES                    
      Operating costs (note 5(a))   (16,039)   (11,973)   (41,289)   (32,115)
      Depletion and depreciation (note 5(b))   (7,574)   (6,283)   (20,255)   (11,302)
      Royalties (note 5(c))   (1,479)   (1,217)   (4,233)   (3,380)
    (25,092)   (19,473)   (65,777)   (46,797)
                     
EARNINGS FROM MINING OPERATIONS   35,202    29,557    104,920    89,675 
                     
EXPLORATION AND EVALUATION EXPENSES (note 6)   (11,233)   (8,327)   (25,300)   (13,334)
GENERAL AND ADMINISTRATIVE EXPENSES (note 7)   (3,123)   (2,342)   (9,495)   (8,172)
                     
OTHER                    
  Interest income   1,484    274    3,804    1,208 
  Depreciation   (117)   (85)   (355)   (162)
  Share based payments (note 19)   (656)   (518)   (2,569)   (1,921)
  Interest and accretion expense (note 8)   (3,483)   (2,578)   (9,385)   (5,913)
  Loss on extinguishment of credit facility (note 14(a))   (1,547)   —    (1,547)   (13,219)
  Foreign exchange and other gain (loss)   1,207    3,846    (835)   4,911 
    (3,112)   939    (10,887)   (15,096)
                     
INCOME BEFORE TAXES   17,734    19,827    59,238    53,073 
Income taxes (note 26)   (12,364)   (10,932)   (27,806)   (25,993)
                     
INCOME FOR THE PERIOD  $5,370   $8,895   $31,432   $27,080 
                     
OTHER COMPREHENSIVE INCOME (LOSS)                    
Items that may in future periods be reclassified to profit or loss:                    
Foreign currency differences arising on translation   76    (3,632)   137    (4,505)
TOTAL COMPREHENSIVE INCOME  $5,446   $5,263   $31,569   $22,575 
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES   OUTSTANDING (note 18)                    
      Basic (millions)   313.8    282.5    310.5    261.4 
      Diluted (millions)   331.5    296.7    328.9    283.1 
                     
EARNINGS PER SHARE (note 18)                    
      Basic  $0.02   $0.03   $0.10   $0.10 
      Diluted  $0.02   $0.03   $0.10   $0.10 

 

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		 
   2023   2022   2023   2022 
OPERATING ACTIVITIES                    
Income for the period  $5,370   $8,895   $31,432   $27,080 
Adjustments for:                    
     Interest and accretion expense (note 8)   3,483    2,578    9,385    5,913 
     Income tax expense   12,364    10,932    27,806    25,993 
     Income taxes paid   (8,094)   (1,252)   (47,203)   (2,113)
     Payment of cash settled RSUs and DSUs   —   (326)   (466)   (2,049)
Adjustments for items not affecting cash:                    
     Depreciation and depletion   7,691    7,081    20,610    13,710 
     Share based payments (note 19)   656    518    2,569    1,921 
     Unrealized foreign exchange loss (gain)   (1,437)   (3,212)   (2,143)   (3,833)
     Extinguishment of credit facility   1,547    —    1,547    13,219 
     Other   210    13    609    63 
Cash provided by operating activities before changes in non-cash working  capital   21,790    25,227    44,146    79,904 
     Accounts receivable and prepaid expenses   (942)   (593)   (2,489)   (1,875)
     Inventory   (1,067)   (3,570)   (5,029)   (10,761)
     Valued added taxes   572    678    3,349    (3,804)
     Trade payables and accrued liabilities   4,666    1,304    3,416    11 
Cash provided by operating activities   25,019    23,046    43,393    63,475 
                     
INVESTING ACTIVITIES                    
Purchase of plant and equipment   (1,864)   (1,752)   (4,538)   (3,898)
Expenditures on mineral properties   (4,560)   —    (9,433)   (5,643)
Deposits and other payments on long term assets   47    (538)   (119)   (781)
Restricted cash and environmental bonding   147    (103)   2,424    (54)
Value added taxes received   —    5,813    —    18,434 
Acquisition of Gold Standard, net of cash received   —    (1,226)   —    (1,226)
Cash provided by (used in) investing activities   (6,230)   2,194    (11,666)   6,832 
                     
FINANCING ACTIVITIES                    
Proceeds from issuance of common shares, net (note 17(b))   —    (196)   18,434    (196)
Proceeds from exercise of stock options and warrants   2,283    209    7,168    16,521 
Repayment of the Newmont loan and the Camino Rojo project loan   —    —    —    (138,336)
Proceeds from Credit Facility, net of transaction costs (note 14(a))   113,350    —    113,350    128,134 
Repayments of Credit Facility, net of transaction costs (note 14(a))   (113,350)   —    (124,450)   — 
Interest paid   (2,142)   (1,887)   (9,094)   (6,509)
Lease payments   (285)   (103)   (715)   (358)
Cash provided by (used in) financing activities   (144)   (1,977)   4,693    (744)
                     
Effects of exchange rate changes on cash   (418)   (858)   59    (931)
                     
Net increase in cash   18,227    22,405    36,479    68,632 
Cash, beginning of period   114,530    66,743    96,278    20,516 
CASH, END OF PERIOD  $132,757   $89,148   $132,757   $89,148 
Supplemental cash flow information (note 21)                    

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

Page 4

 

 

ORLA MINING LTD.

Condensed Interim Consolidated Statements of Changes in Equity

(Unaudited - thousands of United States dollars)

 

   Common shares   Reserves             
   Number of
shares
(thousands)		   Amount   Share based
payments
reserve		   Warrants
reserve		   Total   Accumulated
Other
Comprehensive
Income (loss)		   Accumulated
deficit		   Total 
Balance at January 1, 2022   247,600   $269,198   $10,051   $19,255   $29,306   $2,441   $(116,528)  $184,417 
Shares issued pursuant to acquisition of Gold Standard   43,689    149,363    —    —    —    —    —    149,363 
Share issuance costs   —    (196)   —    —    —    —    —    (196)
Replacement options issued   —    —    1,647    —    1,647    —    —    1,647 
Warrants exercised (note 17)   7,698    15,137    —    (2,067)   (2,067)   —    —    13,070 
Options exercised (note 19)   3,237    6,315    (2,864)   —    (2,864)   —    —    3,451 
RSUs redeemed (note 19)   36    138    (138)   —    (138)   —    —    — 
RSUs settled in cash (note 19)   —    (1,320)   (403)   —    (403)   —    —    (1,723)
DSUs redeemed (note 19)   112    165    (165)   —    (165)   —    —    — 
DSUs settled in cash (note 19)   —    (167)   (159)   —    (159)   —    —    (326)
Share based payments (note 19)   —    —    1,921    —    1,921    —    —    1,921 
Income for the period   —    —    —    —    —    —    27,080    27,080 
Other comprehensive loss   —    —    —    —    —    (4,505)   —    (4,505)
Balance at September 30, 2022   302,372   $438,633   $9,890   $17,188   $27,078   $(2,064)  $(89,448)  $374,199 
                                         
Balance at January 1, 2023   305,809   $445,316   $9,897   $14,112   $24,009   $(1,583)  $(70,758)  $396,984 
Shares issued pursuant to top up right, net (note 17(b))   3,987    18,434    —    —    —    —    —    18,434 
Shares issued for property payments   62    242    —    —    —    —    —    242 
Warrants exercised (note 17)   1,282    3,190    —    (343)   (343)   —    —    2,847 
Options exercised (note 19)   3,223    6,108    (1,787)   —    (1,787)   —    —    4,321 
RSUs redeemed (note 19)   58    228    (228)   —    (228)   —    —    — 
Share based payments (note 19)   —    —    2,313    —    2,313    —    —    2,313 
Income for the period   —    —    —    —    —    —    31,432    31,432 
Other comprehensive income   —    —    —    —    —    137    —    137 
Balance at September 30, 2023   314,421   $473,518   $10,195   $13,769   $23,964   $(1,446)  $(39,326)  $456,710 

 

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, 2023 and 2022

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

 

1.CORPORATE INFORMATION AND NATURE OF OPERATIONS

 

Orla Mining Ltd. was incorporated in Alberta in 2007 and was continued into British Columbia in 2010 and subsequently into Ontario under the Business Corporations Act (Ontario) in 2014. In 2016, the Company was continued as a federal company under the Canada Business Corporations Act. The “Company”, “Orla”, “we”, and “our” refer to Orla Mining Ltd. and its subsidiaries. The registered office of the Company is located at Suite 1010, 1075 West Georgia Street, Vancouver, Canada.

 

The Company is engaged in the acquisition, exploration, development, and exploitation of mineral properties, and holds the Camino Rojo gold and silver mine in Zacatecas State, Mexico, Cerro Quema gold project in Panama, and the South Railroad and Lewis gold projects in Nevada, USA.

 

These condensed interim consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Different bases of measurement may be appropriate if the Company is not expected to continue operations for the foreseeable future. The Company declared commercial production at Camino Rojo, effective April 1, 2022.

 

2.BASIS OF PREPARATION

 

(a)STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION

 

These condensed interim consolidated financial statements have been prepared in accordance with IAS 34 «Interim Financial Reporting» and do not include all the information required for full annual financial statements.

 

The preparation of these condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

These condensed interim consolidated financial statements are presented in United States dollars and include the accounts of the Company and its wholly owned subsidiaries. All material intercompany transactions and balances have been eliminated upon consolidation.

 

On November 13, 2023, the Board of Directors approved these condensed interim 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, 2023 and 2022

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

 

3.MATERIAL ACCOUNTING POLICY INFORMATION

 

These condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as at and for the years ended December 31, 2022 and 2021.

 

We applied the same accounting policies in these condensed interim consolidated financial statements as those applied in the Company’s audited consolidated financial statements as at and for the year ended December 31, 2022, except as noted herein. In preparing these condensed interim consolidated financial statements, the significant judgements we made in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the year ended December 31, 2022.

 

4.REVENUE

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Gold  $59,671   $48,839   $169,175   $135,865 
Silver   623    191    1,522    607 
Revenue  $60,294   $49,030   $170,697   $136,472 
                     
Customer A  $19,225   $26,959   $49,062   $108,608 
Customer B   2,889    21,240    57,311    21,240 
Customer C   36,044    —    55,225    — 
Others   2,136    831    9,099    6,624 
Revenue  $60,294   $49,030   $170,697   $136,472 

 

5.COST OF SALES

 

(a)OPERATING COSTS

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Mining and processing costs  $15,859   $11,774   $40,757   $31,416 
Refining and transportation costs   180    199    532    699 
   $16,039   $11,973   $41,289   $32,115 

 

Page 7

 

 

ORLA MINING LTD. 

Notes to the Condensed Interim Consolidated Financial Statements 

Three and nine months ended September 30, 2023 and 2022

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

  

(b)DEPLETION AND DEPRECIATION

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Depletion of producing mineral property  $2,507   $3,762   $8,486   $7,075 
Depreciation of plant and equipment   5,067    2,521    11,769    4,227 
Depletion and depreciation  $7,574   $6,283   $20,255   $11,302 

 

(c)ROYALTIES

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Camino Rojo Oxide 2% NSR royalty  $1,197   $979   $3,381   $2,700 
Mexican 0.5% Extraordinary Mining Duty   282    238    852    680 
   $1,479   $1,217   $4,233   $3,380 

 

6.EXPLORATION AND EVALUATION EXPENSES

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Camino Rojo  $2,645   $3,479   $6,636   $5,734 
Nevada (South Railroad, Lewis and Monitor Gold)   7,920    2,309    13,358    2,309 
Cerro Quema   494    2,353    4,899    4,796 
Other   174    186    407    495 
   $11,233   $8,327   $25,300   $13,334 

 

Page 8

 

 

ORLA MINING LTD. 

Notes to the Condensed Interim Consolidated Financial Statements 

Three and nine months ended September 30, 2023 and 2022

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

 

7.GENERAL AND ADMINISTRATIVE EXPENSES

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Office and administrative  $929   $769   $2,473   $2,116 
Professional fees   550    357    1,463    1,682 
Regulatory and transfer agent   37    44    433    284 
Salaries and benefits   1,607    1,172    5,126    4,090 
   $3,123   $2,342   $9,495   $8,172 

 

8.INTEREST AND ACCRETION EXPENSE

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Interest (note 8(a))  $3,264   $2,322   $8,610   $4,694 
Accretion (note 8(b))   219    256    775    1,219 
Interest and accretion expense  $3,483   $2,578   $9,385   $5,913 

 

(a)INTEREST EXPENSE

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Credit Facility (note 14(a))  $2,321    1,761   $6,898    2,722 
Fresnillo obligation (note 14(b))   292    483    868    966 
Project loan   —    —    —    869 
Interest expense on leases (note 15)   37    21    118    41 
Deferred revenue   553    —    553    — 
Other   61    57    173    96 
   $3,264   $2,322   $8,610   $4,694 

 

Page 9

 

  

ORLA MINING LTD. 

Notes to the Condensed Interim Consolidated Financial Statements 

Three and nine months ended September 30, 2023 and 2022

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

 

(b)ACCRETION EXPENSE

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Credit Facility (note 14(a))  $77   $138   $369   $244 
Accretion of site closure provisions (note 16)   142    118    406    348 
Newmont loan   —    —    —    366 
Project loan   —    —    —    261 
    219    256    775    1,219 

 

9.INVENTORY

 

   September 30,
2023		   December 31,
2022		 
Current          
     Stockpiled ore  $748   $1,869 
     In-process inventory   22,524    15,961 
     Finished goods inventory   1,333    1,406 
     Materials and supplies   3,966    3,210 
     Inventory – current  $28,571   $22,446 
           
Long term          
     Stockpiled low grade ore  $5,245   $4,096 
           

 

Long term inventory consists of stockpiled ore that is not expected to be processed within 12 months.

 

Included within inventory at September 30, 2023 is $9.2 million of depreciation and depletion (December 31, 2022 — $6.3 million).

 

Page 10

 

 

ORLA MINING LTD. 

Notes to the Condensed Interim Consolidated Financial Statements 

Three and nine months ended September 30, 2023 and 2022

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

 

10.VALUE ADDED TAXES RECOVERABLE

 

   September 30,
2023		   December 31,
2022		 
Current portion  $6,769   $8,659 
Long term portion   5,172    5,229 
   $11,941   $13,888 

 

Value added taxes (“IVA”) paid in Mexico are fully recoverable. However, IVA recovery returns in Mexico are subject to complex filing requirements and detailed audit or review by the fiscal authorities. Consequently, the timing of receipt of refunds is uncertain. We have used judgement in classifying the current and non-current portions of our Mexican VAT receivables. Factors that we considered include (i) the regularity of payments received, (ii) discussions with and communications from the Mexican tax authorities with respect to specific claims, and (iii) the expected length of time for refunds in accordance with Mexico’s regulations.

 

At September 30, 2023, approximately 86 million Mexican pesos ($4.9 million) (December 31, 2022 —approximately 86 million Mexican pesos ($4.4 million)) were under dispute with the taxation authorities. This amount is included within long term value added taxes recoverable.

 

Page 11

 

  

ORLA MINING LTD. 

Notes to the Condensed Interim Consolidated Financial Statements 

Three and nine months ended September 30, 2023 and 2022

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

 

11.PROPERTY, PLANT AND EQUIPMENT

 

Our operating property is the Camino Rojo Oxide Gold Mine in Mexico and constitute substantially all our buildings, and machinery and equipment.

 

   Producing
mineral
property		  Buildings  Machinery
and
equipment		  Other
assets		  Other right
of use
assets		  Construction
in progress		  Total 
Cost                             
At January 1, 2022  $—  $66  $5,238  $1,261  $2,119  $—  $8,684 
Additions   6,616   1,788   3,272   666   2,300   —   14,642 
Transfer from construction   127,002   58,869   36,684   608   —   —   223,163 
Reclassification of capitalized interest   (19,020)  11,585   7,341   94   —   —   — 
Change in site closure provision (note 16)   1,155   (300)  (190)  —   —   —   665 
Leased assets derecognized   —   —   —   —   (215)  —   (215)
Due to changes in exchange rates   —   —   —   (9)  (44)  —   (53)
At December 31, 2022   115,753   72,008   52,345   2,620   4,160   —   246,886 
Net additions   9,433   78   1,877   738   416   1,843   14,385 
Change in site closure provision (note 16)   (273)  (927)  (593)  —   —   —   (1,793)
Due to changes in exchange rates   —   —   1   1   2   —   4 
At September 30, 2023  $124,913  $71,159  $53,630  $3,359  $4,578  $1,843  $259,482 
                              
Accumulated depreciation                             
At January 1, 2022   —   6   350   288   405   —   1,049 
Depletion and depreciation   9,641   6,280   4,541   421   764   —   21,647 
Leased assets derecognized   —   —   —   —   (215)  —   (215)
Due to changes in exchange rates   —   —   —   (4)  (7)  —   (11)
At December 31, 2022  $9,641  $6,286  $4,891  $705  $947  $—  $22,470 
Depletion and depreciation   9,356   7,124   5,009   389   782   —   22,660 
At September 30, 2023  $18,997  $13,410  $9,900  $1,094  $1,729  $—  $45,130 
                              
Net book value                             
At December 31, 2022  $106,112  $65,722  $47,454  $1,915  $3,213  $—  $224,416 
At September 30, 2023  $105,916  $57,749  $43,730  $2,265  $2,849  $1,843  $214,352 

 

Page 12

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

12.EXPLORATION AND EVALUATION PROPERTIES

 

Our exploration and evaluation properties consist of the Cerro Quema Project in Panama and the Nevada projects (South Railroad, Lewis and Monitor Gold projects in Nevada, United States).

 

Acquisition costs  Nevada projects   Cerro Quema   Total 
As at September 30, 2023 and December 31, 2022  $160,314   $82,429   $242,743 

 

13.TRADE PAYABLES AND ACCRUED LIABILITIES

 

   September 30,
2023		   December 31,
2022		 
Trade payables  $4,565   $6,707 
Goods or services received awaiting vendor invoices   6,912    3,139 
Payroll related   6,117    3,380 
Royalties payable   2,021    2,119 
Current portion of lease obligations (note 15)   958    846 
Accrued interest on Credit Facility (note 14(a))   580    1,660 
RSUs expected to be cash settled (note 19(b))   —    352 
Other   668    1,472 
   $21,821   $19,675 

 

Page 13

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

14.DEBT

 

   September 30, 2023 
   Current   Long term   Total 
2023 Revolving Facility (note 14(a))  $—   $113,350   $113,350 
Fresnillo obligation (note 14(b))   22,800    —    22,800 
   $22,800   $113,350   $136,150 

 

   December 31, 2022 
   Current   Long term   Total 
2022 Credit Facility (note 14(a))  $22,200   $100,795   $122,995 
Fresnillo obligation (note 14(b))   22,800    —    22,800 
   $45,000   $100,795   $145,795 

 

(a)CREDIT FACILITY

 

On April 28, 2022, the Company entered into a credit facility (the “2022 Credit Facility”) consisting of a $100 million term facility and a $50 million revolving facility through a syndicate of lenders. The Credit Facility consisted of two parts, namely (1) a $100 million term facility with a five-year term, repayable in 18 equal quarterly instalments, and (2) a $50 million revolving facility. The revolving facility had a three-year term.

 

On August 28, 2023, the term facility was extinguished in its entirety and the amounts due thereunder were transferred to a new $150 million revolving facility (the “2023 Revolving Facility”). The 2023 Revolving Facility has a four-year term maturing on August 28, 2027, with an option to increase this facility to $200 million, subject to certain conditions.

 

As a result of this change in the Company’s debt, we wrote off $1,088,000 of unamortized transaction costs of the 2022 Credit Facility and expensed $459,000 in costs and fees.

 

The applicable interest rate for the 2023 Revolving Facility is based on the term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin ranging from 2.50% to 3.75% based on the Company’s leverage ratio at the end of each fiscal quarter.

 

   Three months ended
September 30		   Nine months ended
September 30		 
Average interest rate paid on the 2023 Revolving Facility  2023   2022   2023   2022 
Rate per annum   7.9%   N/A    7.9%   N/A 

 

The 2023 Revolving Facility is secured by the Company’s present and future assets, property and all proceeds thereof other than present and future assets owned by Minera Cerro Quema, which is excluded from the collateral. The 2023 Revolving Facility is subject to certain covenants – refer to note 23(c) for details. The Company may prepay all or any portion of the amounts owed under the 2023 Revolving Facility without penalty.

 

Page 14

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

   2022 Credit
Facility - term
portion		   2022 Credit
Facility –
revolving
portion		   2023 Revolving
Facility		   Total 
At December 31, 2022  $93,338   $29,657   $—   $122,995 
Interest expense during the period   4,527    1,522    849    6,898 
Accretion during the period   283    86    —    369 
Interest paid during the period   (5,270)   (1,910)   (799)   (7,979)
Principal repayments during the period   (94,450)   (30,000)   —    (124,450)
Converted to revolving facility   —    —    113,350    113,350 
Expensed upon conversion to revolving facility   829    258    —    1,087 
Reallocated to accrued interest payable   743    387    (50)   1,080 
At September 30, 2023  $—   $—   $113,350   $113,350 
                     
Current   —    —    —    — 
Non-current   —    —    113,350    113,350 
   $—   $—   $113,350   $113,350 

 

A standby fee is payable on the undrawn portion of the 2023 Revolving Facility. The standby fee is charged at 0.56% to 0.84% depending on the leverage ratio. At September 30, 2023, the undrawn amount was $36,650,000.

 

Subsequent to the reporting period, the Company made a principal repayment of $25,000,000 on the 2023 Revolving Facility.

 

(b)FRESNILLO OBLIGATION

 

Pursuant to the terms of the Layback Agreement, we agreed to pay Fresnillo total cash consideration of $62.8 million through the following staged payment schedule:

 

i.$25.0 million upon closing of the transaction (paid);
ii.$15.0 million on December 1, 2022 (paid); and
iii.$22.8 million on December 1, 2023

 

The amounts payable bear interest at 5% per annum, payable quarterly. To March 31, 2022, we capitalized the interest on this loan to “Mineral properties”. On April 1, 2022, we commenced commercial production at the Camino Rojo Oxide Gold Mine and began to expense the interest on this obligation.

 

Page 15

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

   Nine months
ended
September 30,
2023		   Year ended
December 31,
2022		 
Beginning of period  $22,800   $37,800 
Interest capitalized during the period   —    473 
Interest expense during the period (note 8)   868    1,383 
Cash interest paid   (868)   (1,856)
Principal repaid   —    (15,000)
End of period  $22,800   $22,800 

 

15.LEASE OBLIGATIONS

 

The Company has lease contracts for mining equipment, vehicles and buildings. Leases of mining equipment have lease terms of five years, while vehicles and buildings generally have lease terms between three and five years.

 

(a)LEASE OBLIGATIONS

 

   Nine months
ended
September 30,
2023		   Year ended
December 31,
2022		 
Beginning of year  $3,173   $1,401 
Additions   533    2,300 
Interest expense   118    87 
Lease payments   (833)   (661)
Due to changes in exchange rates   133    46 
End of period  $3,124   $3,173 
           
Current  $958   $846 
Non-current   2,166    2,327 
   $3,124   $3,173 

 

Page 16

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

(b)LEASE EXPENSES RECOGNIZED

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Interest on lease liabilities  $37   $21   $118   $41 
Variable lease payments not included in the measurement of lease liabilities   3,333    4,706    9,917    11,258 
Expenses relating to short-term leases   57    89    176    131 
Expenses relating to leases of low-value assets, excluding short-term leases   3    17    67    56 
   $3,430   $4,833   $10,278   $11,486 

 

16.SITE CLOSURE PROVISIONS

 

   Camino Rojo   Cerro
Quema
Project		   Nevada
projects		   Total 
At December 31, 2021  $5,117   $343   $—   $5,460 
Acquisition of Gold Standard   —    —    1,603    1,603 
Changes in cost estimates   351    —    —    351 
Change in estimated cash flows resulting from current activities   427    —    —    427 
Remediation activities conducted during the period   (88)   —    —    (88)
Accretion during the period (note 8)   494    —    14    508 
At December 31, 2022   6,301    343    1,617    8,261 
Changes in cost estimates   (1,710)   —    364    (1,346)
Accretion during the period (note 8)   394    —    12    406 
At September 30, 2023  $4,985   $343   $1,993   $7,321 

 

   Camino Rojo   Cerro Quema
Project		   Nevada projects 
Estimated settlement dates   2033 to 2047         2034 
                
Undiscounted risk-adjusted cash flows  $9,873   $343   $2,253 
Inflation rate   3.8%   —    2.5%
Discount rate   9.5%   —    3.6%

 

Page 17

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

17.SHARE CAPITAL

 

(a)AUTHORIZED SHARE CAPITAL

 

The Company’s authorized share capital consists of an unlimited number of common shares without par value and an unlimited number of preferred shares without par value.

 

(b)ISSUED SHARE CAPITAL

 

On May 11, 2023, pursuant to the Investor Rights Agreement between Agnico Eagle Mines Limited (“Agnico Eagle”) and the Company, Agnico Eagle partially exercised its top-up right and subscribed for 3,987,241 common shares of the Company at a price of C$6.27 per common share, for proceeds of C$25,000,000 ($18,551,000). The Company incurred transaction costs of C$156,000 ($117,000).

 

In accordance with the Investor Rights Agreement, Agnico Eagle’s top-up right was triggered as a result of its percentage ownership in the Company’s common shares being diluted by at least 1% due to the exercise or settlement of convertible securities of the Company.

 

(c)WARRANTS

 

The following summarizes information about the number of warrants outstanding during the period.

 

Expiry date  Exercise price   December 31, 2022   Exercised   Expired   September 30, 2023 
December 18, 2026  C$3.00    29,545,000    (1,281,800)   —    28,263,200 
                          
Weighted average exercise price       C$3.00   C$3.00   C$       —   C$3.00 

 

Subsequent to the reporting period, the Company issued 10,000 common shares for proceeds of C$30,000 ($22,000) pursuant to the exercise of warrants.

 

Page 18

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

18.EARNINGS PER SHARE

 

Earnings per share has been calculated using the weighted average number of common shares outstanding for the three months ended September 30, 2023 and 2022 as follows:

 

(a)BASIC

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Income for the period  $5,370   $8,895   $31,432   $27,080 
Weighted average number of common shares (thousands)   313,817    282,476    310,462    261,364 
Basic earnings per share  $0.02   $0.03   $0.10   $0.10 

 

(b)DILUTED

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Income for the period  $5,370   $8,895   $31,432   $27,080 
                     
Weighted average number of common shares (thousands)   313,817    282,476    310,462    261,364 
Dilutive potential ordinary shares                    
Warrants   14,181    9,441    14,181    15,320 
Options   2,027    3,526    2,788    4,819 
RSUs   311    224    336    386 
DSUs   677    572    634    682 
Bonus shares   500    500    500    500 
Weighted average number of ordinary shares   331,513    296,739    328,901    283,071 
                     
Diluted earnings per share  $0.02   $0.03   $0.10   $0.10 

 

Page 19

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

19.SHARE-BASED PAYMENTS

 

The Company has five different forms of share-based payments for eligible recipients – stock options, restricted share units (“RSUs”), deferred share units (“DSUs”), performance share units (“PSUs”), and bonus shares. The bonus shares have fully vested but have not yet been issued.

 

   Three months ended
September 30		   Nine months ended
September 30		 
Share-based payments expense  2023   2022   2023   2022 
Stock options (note 19(a))  $298   $335   $1,018   $1,083 
Restricted share units (note 19(b))   307    183    858    530 
Deferred share units (note 19(c))   —    —    550    308 
Performance share units (note 19(d))   51    —    143    — 
Share based payments expense  $656   $518   $2,569   $1,921 

 

(a)STOCK OPTIONS

 

Stock options granted by the Company prior to 2022 typically had a five-year life, with one third each vesting on grant date, and one year and two years after grant date. Commencing in 2022, stock options granted by the Company have a five-year life, with one third each vesting one, two, and three years after grant date.

 

Stock options of Gold Standard Ventures Inc. (“Gold Standard”) that were outstanding at the acquisition date of August 12, 2022 were exchanged for options to acquire common shares of Orla (“Replacement Options”), resulting in the issuance of 1,758,334 Replacement Options, which are exercisable until their original expiry dates. For those individuals who did not continue on with Orla, the expiry date is capped at August 12, 2024.

 

   Nine months ended September 30 
   2023   2022 
Stock options outstanding  Number   Weighted
average
exercise price		   Number   Weighted
average
exercise price		 
Outstanding, January 1   9,178,889   C$3.71    9,900,874   C$1.86 
Replacement options   —    —    1,758,334    8.43 
Granted   457,260    6.57    1,000,660    5.66 
Exercised   (3,222,960)   1.81    (3,237,319)   1.36 
Expired, forfeited or cancelled   (246,644)   13.14    (83,814)   16.81 
Outstanding, September 30   6,166,545   C$4.54    9,338,735   C$3.55 
                     
Vested, September 30   4,842,167   C$4.18    8,120,781   C$3.26 

 

Page 20

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

The stock options granted during the nine months ended September 30, 2023 had a grant date fair value of C$1.4 million ($1.0 million) using the following weighted average assumptions:

 

·Share prices at grant dates – C$6.58 and C$6.07, expected volatility 50%, expected life - 5 years, risk free interest rate 3.0% and expected dividends – nil.

 

(b)RESTRICTED SHARE UNITS

 

Restricted Share Units (“RSU’s) awarded by the Company typically vest one-third each one, two, and three years after award date.

 

   Nine months ended
September 30		 
Number of RSUs outstanding:  2023   2022 
Outstanding, January 1   443,267    707,840 
Awarded   295,429    172,301 
Vested and settled   (152,203)   (402,430)
Forfeitures during the period   —    (34,444)
Outstanding, September 30   586,493    443,267 

 

       Number vesting in the year 
Number of RSUs outstanding:  Total   2022   2023   2024   2025   2026 
Outstanding, September 30, 2022   443,267    41,865    220,873    126,812    53,717    — 
Outstanding, September 30, 2023   586,493     N/A    —    335,811    152,193    98,489 

 

Restricted Share Units (“RSUs”) are valued based on the closing price of the Company’s common shares on the trading day immediately prior to award. Certain RSUs may be settled in cash at the option of the Company.

 

During the nine months ended September 30, 2023, the Company elected to settle 94,063 RSUs in cash for $0.5 million (nine months ended September 30, 2022 — 365,935 RSUs cash-settled for $1.7 million).

 

(c)DEFERRED SHARE UNITS

 

Deferred Share Units (“DSUs”) are awarded by the Company to directors. These DSUs vest immediately but are not settled until the end of the director’s tenure. They may be settled in cash or common shares at the option of the Company. DSUs are valued using the closing price of the Company’s common shares immediately prior to award.

 

Page 21

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

   Nine months ended
September 30		 
Number of DSUs outstanding:  2023   2022 
Outstanding, January 1   559,725    707,028 
Awarded and vested immediately   117,265    69,290 
Settled during the period   —    (216,593)
Outstanding, September 30   676,990    559,725 
           
Vested, September 30   676,990    559,725 

  

(d)PERFORMANCE SHARE UNITS

 

In March 2023, the Board of Directors approved a performance share unit (“PSUs”) plan for certain officers of the Company. The PSUs cliff vest after three years and are settled in cash. The cash payment upon vesting will be based on the number of PSUs, multiplied by the five-day volume weighted average price of the Company’s shares upon vesting, which is then multiplied by a “performance percentage”. The performance percentage ranges from 0% to 200% based on the Company’s total shareholder return compared to a peer group, consisting of the constituents of the S&P/TSX Global Gold Index.

 

We recognize share-based compensation expense related to these PSUs over the vesting period. We adjust the amount recognized at each reporting period to reflect changes in quoted market values of the Company and the peer group, the lapsed portion of the vesting period, the number of PSUs expected to vest, and the expected performance percentage.

 

On March 27, 2023, the Company issued a total of 198,737 PSUs with an estimated aggregate grant date fair value of $1.27 million.

 

   Nine months ended
September 30		 
Number of PSUs outstanding:  2023   2022 
Outstanding, January 1   —    — 
Granted during the period   198,737    — 
Outstanding, September 30   198,737    — 
           
Vested, September 30   —    — 

 

(e)BONUS SHARES

 

During 2017, the Board of Directors awarded 500,000 common shares to the non-executive Chairman of the Company as bonus shares. The bonus shares were subject to a vesting period from June 19, 2017, to June 18, 2020 (the “Eligibility Period”). Although the bonus shares have vested, they will become issuable (1) when the non-executive Chairman ceases to act as a director of the Company, or (2) upon a change of control of the Company.

 

Page 22

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

20.RELATED PARTY TRANSACTIONS

 

The Company’s related parties include:

 

Related party  Nature of the relationship
Key management personnel  Key management personnel are the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, Chief Sustainability Officer, the Senior Vice President Exploration, and members of the Board of Directors of the Company.

 

(a)KEY MANAGEMENT PERSONNEL

 

Compensation to key management personnel was as follows:

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Salaries and short term incentives  $387   $331   $3,062   $3,553 
Directors’ fees   98    69    265    226 
Share based payments   193    396    1,510    1,582 
   $678   $796   $4,837   $5,361 

 

(b)TRANSACTIONS

 

The Company had no other material transactions with related parties other than key management personnel during the nine months ended September 30, 2023, and 2022.

 

(c)OUTSTANDING BALANCES AT THE REPORTING DATE

 

At September 30, 2023, estimated accrued short term incentive compensation totaled $1.0 million and is included in accrued liabilities (December 31, 2022 – $1.1 million).

 

Page 23

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

21.SUPPLEMENTAL CASH FLOW INFORMATION

 

(a)CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents consists of bank current accounts and cash on hand.

 

(b)NON-CASH INVESTING AND FINANCING ACTIVITIES

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Financing activities                    
Stock options exercised, credited to share capital with an offset to reserves  $506   $89   $1,787   $2,863 
Warrants exercised, credited to share capital with an offset to reserves   113    —    343    2,067 
Common shares issued on maturity of RSUs, credited to share capital with an offset to reserves   —    —    228    541 
Common shares issued on maturity of DSUs, credited to share capital with an offset to reserves   —    —    —    324 
                     
Investing activities                    
Common shares issued pursuant to the acquisition of Gold Standard, credited to share capital with an offset to the assets acquired and liabilities assumed   —    149,363    —    149,363 
Replacement options issued pursuant to the acquisition of Gold Standard, credited to reserves with an offset to the assets acquired and liabilities assumed   —    1,647    —    1,647 
Initial recognition of right of use assets, with an offset to lease obligation   533    1,746    533    1,825 
Marketable securities adjustment included in account receivable with an offset to other gains   —    8    (3)   10 

 

Page 24

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

22.SEGMENT INFORMATION

 

(a)REPORTABLE SEGMENTS

 

The operating and reportable segments of the Company are based on the reports which are reviewed by the chief operating decision maker (“CODM”) in making strategic resource allocation decisions. These operating segments are (1) the Mexican project, (2) the Panamanian project, (3) the Nevada projects and (4) the corporate office. The operating segments other than corporate office are each managed by a dedicated General Manager and management team. The corporate office oversees the plans and activities of early stage exploration projects.

 

(b)GEOGRAPHIC SEGMENTS

 

We conduct our activities in four geographic areas: Mexico, Panama, Nevada USA, and Canada (Corporate).

 

(i)Income (loss) for the period by segment

 

Nine months ended September 30, 2023  Mexico   Panama   Nevada   Corporate   Total 
Revenue (note 4)  $170,505   $—   $—   $192   $170,697 
Cost of sales   (65,708)   —    —    (69)   (65,777)
Earnings from mining operations   104,797    —    —    123    104,920 
Exploration and evaluation expenses (note 6)   (6,636)   (4,899)   (13,358)   (407)   (25,300)
General and administrative expenses (note 7)   —    —    —    (9,495)   (9,495)
Interest income   3,001    —    —    803    3,804 
Depreciation   (42)   (12)   (101)   (200)   (355)
Share based payments (note 19)   (124)   (63)   (246)   (2,136)   (2,569)
Interest and accretion expense   (1,313)   —    (641)   (7,431)   (9,385)
Loss on extinguishment of credit facility   —    —    —    (1,547)   (1,547)
Foreign exchange and other gain (loss)   (787)   —    —    (48)   (835)
Income taxes   (26,530)   —    —    (1,276)   (27,806)
Income (loss) for the period  $72,366   $(4,974)  $(14,346)  $(21,614)  $31,432 

 

Page 25

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

Nine months ended September 30, 2022  Mexico   Panama   USA   Corporate   Total 
Revenue (note 4)  $136,472   $—   $—   $—   $136,472 
Cost of sales   (46,797)   —    —    —    (46,797)
Earnings from mining operations   89,675    —    —    —    89,675 
Exploration and evaluation expenses (note 6)   (5,734)   (4,796)   (2,486)   (318)   (13,334)
General and administrative expenses (note 7)   —    —    —    (8,172)   (8,172)
Interest income   1,068    —    —    140    1,208 
Depreciation   (11)   (12)   (14)   (125)   (162)
Share based payments (note 19)   (26)   (52)   —    (1,843)   (1,921)
Interest and accretion expense   (1,718)   —    (8)   (4,187)   (5,913)
Loss on extinguishment of credit facility   —    —    —    (13,219)   (13,219)
Foreign exchange and other gain (loss)   772    —    37    4,102    4,911 
Income taxes   (23,880)   —    —    (2,113)   (25,993)
Income (loss) for the period  $60,146   $(4,860)  $(2,471)  $(25,735)  $27,080 

 

(ii)Assets by segment

 

At September 30, 2023  Mexico   Panama   Nevada   Corporate   Total 
Property, plant and equipment  $212,887   $28   $561   $876   $214,352 
Exploration and evaluation properties   —    82,429    160,314    —    242,743 
Total assets   342,325    83,371    160,698    61,340    647,734 

 

At December 31, 2022  Mexico   Panama   Nevada   Corporate   Total 
Property, plant and equipment  $222,767   $39   $577   $1,033   $224,416 
Exploration and evaluation properties   —    82,429    160,314    —    242,743 
Total assets   348,390    83,291    163,857    18,278    613,816 

 

Page 26

 

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

23.CAPITAL MANAGEMENT

 

(a)OBJECTIVES

 

Our objectives when managing capital are to safeguard the Company’s ability to continue as a going concern to pursue the exploration, evaluation, development, and exploitation of our mineral properties and to maintain a flexible capital structure.

 

We manage our capital structure and adjust it considering changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the Company’s capital structure, we may issue new shares, take on additional debt or repay outstanding debt, or acquire or dispose of assets. We currently do not pay regular dividends.

 

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

 

(b)INVESTMENT POLICY

 

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

 

(c)CREDIT FACILITY

 

On April 28, 2022, the Company entered into the 2022 Credit Facility consisting of a $100 million term facility and a $50 million revolving facility.

 

On August 28, 2023, the Company amended the 2022 Credit Facility, entering into the 2023 Revolving Facility, consisting of a $150 million revolving facility pursuant to which we had drawn $113.4 million as of September 30, 2023. The 2023 Revolving Facility includes covenants customary for a facility of this nature, including compliance with customary restrictive covenants and financial covenants related to maintaining a leverage ratio at less than or equal to 3.50, an interest service coverage ratio at greater than or equal to 4, a tangible net worth greater than or equal to $278.6 million, and minimum liquidity in an amount greater than or equal to $15 million. The Company is prohibited from declaring, paying or setting aside for payment any dividends unless certain financial covenants and ratios are met.

 

As at September 30, 2023, the Company was in compliance with all covenants.

 

Page 27

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

24.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 1The 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 2The 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 3If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

 

The carrying value of cash and cash equivalents, trade and other receivables, restricted cash, trade payables and accrued liabilities approximates the fair value due to the short-term nature of the instruments. The fair value of the Credit Facility and Fresnillo obligation is determined using discounted cash flows based on the expected amounts and timing of the cash flows discounted using a market rate of interest adjusted for appropriate credit risk.

 

The fair value of the 2023 Revolving Facility at September 30, 2023 was estimated at $113.4 million using a discount rate of 7.9%. The fair value of the Fresnillo obligation at September 30, 2023 was estimated at $22.7 million (December 31, 2022 – $22.3 million) using a discount rate of 7.9% (December 31, 2022 – 7.5%).

 

Page 28

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

At September 30, 2023, the carrying values and fair values of our financial instruments by category were as follows:

 

          Fair value 
   Classification  Carrying
value		   Level 1   Level 2   Level 3   Short term
nature		   Total fair
value		 
Financial assets                                 
Cash and cash equivalents  FVTPL  $132,757   $132,757   $—   $—   $—   $132,757 
Accounts receivable  Amortized cost   316    18    —    —    298    316 
Restricted cash  Amortized cost   1,008    1,008    —    —    —    1,008 
      $134,081   $133,783   $—   $—   $298   $134,081 
                                  
Financial liabilities                                 
Trade and other payables  Amortized cost  $6,605   $—   $—   $—   $6,605   $6,605 
Accrued liabilities  Amortized cost   12,805    141    —    —    12,664    12,805 
Lease obligation  Amortized cost   3,124    —    3,124    —    —    3,124 
Revolving Facility  Amortized cost   113,350    —    —    113,350    —    113,350 
Fresnillo obligation  Amortized cost   22,800    —    —    22,693    —    22,693 
      $158,684   $141   $3,124   $136,043   $19,269   $158,577 

 

At December 31, 2022, the carrying values and fair values of our financial instruments by category were as follows:

 

          Fair value 
   Classification  Carrying
value		   Level 1   Level 2   Level 3   Short term
nature		   Total fair
value		 
Financial assets                                 
Cash and cash equivalents  FVTPL  $96,278   $96,278   $—   $—   $—   $96,278 
Accounts receivable  Amortized cost   317    21    —    —    296    317 
Restricted cash  Amortized cost   3,432    3,432    —    —    —    3,432 
      $100,027   $99,731   $—   $—   $296   $100,027 
                                  
Financial liabilities                                 
Trade and other payables  Amortized cost  $8,851   $—   $—   $—   $8,851   $8,851 
Accrued liabilities  Amortized cost   7,967    352    —    —    7,615    7,967 
Lease obligation  Amortized cost   3,173    —    3,173    —    —    3,173 
Credit Facility  Amortized cost   122,995    —    —    124,450    —    124,450 
Fresnillo obligation  Amortized cost   22,800    —    —    22,296    —    22,296 
      $165,786   $352   $3,173   $146,746   $16,466   $166,737 

 

We determine whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

 

Page 29

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

25.COMMITMENTS AND CONTINGENCIES

 

(a)COMMITMENTS

 

The Company has issued purchase orders for construction, equipment purchases, materials and supplies, and other services at Camino Rojo. At September 30, 2023, these outstanding purchase orders and contracts totaled approximately $1.5 million (December 31, 2022 – $2.0 million), which we expect will be filled within the next 12 months.

 

The Company is committed to making severance payments totaling approximately $6.8 million (December 31, 2022 – $3.7 million) to certain officers and management in the event of a change in control. As the likelihood of these events occurring is not determinable, this amount is not reflected in these consolidated financial statements.

 

(b)DISCRETIONARY MINERAL PROPERTY-RELATED COMMITMENTS

 

As is customary in mineral exploration, some of the mineral properties held by the Company as exploration and evaluation assets have annual minimum work commitments and lease payments required to maintain these properties in good standing pursuant to their underlying agreements.

 

(c)CONTINGENCIES

 

We may, from time to time, be a party to legal proceedings, which arise in the ordinary course of our business. We are not aware of any pending or threatened litigation that, if resolved against us, would have a material effect on our consolidated financial position, results of operations or cash flows.

 

Page 30

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

26.INCOME TAXES

 

Tax expense consists of (i) current income tax on taxable income, (ii) 7.5% special mining duty ("SMD") on income subject to SMD, and (iii) withholding taxes attributable to interest charged on intercompany loans to the Mexican operating company, as well as (iv) deferred income tax, and (v) deferred special mining duty.

 

   Three months ended
September 30		   Nine months ended
September 30		 
   2023   2022   2023   2022 
Current income tax expense  $8,471   $9,200   $24,067   $18,500 
Mexican 7.5% Special Mining Duty expense   3,280    480    9,052    5,380 
Withholding tax expense   422    1,252    1,276    2,113 
Deferred income tax expense   1,184    —    (5,268)   — 
Deferred Mexican 7.5% Special Mining Duty expense   (993)   —    (1,321)   — 
Tax expense  $12,364   $10,932   $27,806   $25,993 

 

Page 31

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

27.RECLASSIFICATION OF PRIOR PERIOD CASH FLOW FIGURES

 

Certain of the prior period’s figures have been reclassified to conform to the presentation in the current period. These reclassifications were (i) the inclusion of withholding taxes within tax expense, and (ii) the characterization of tax expense and taxes paid as part of cash flows before changes in non-cash working capital.

 

(a)INCOME STATEMENT

 

   Three months
ended		   Nine months
ended		 
         
   September 30, 2022 
Other        
Other gain (loss) - As previously presented   3,842    4,905 
Foreign exchange gain (loss) - As previously presented   4    6 
As currently presented – now grouped together  $3,846   $4,911 

 

(b)STATEMENT OF CASH FLOWS

 

   Three months
ended		   Nine months
ended		 
         
   September 30, 2022 
Cash provided by operating activities before changes in non-cash working capital          
As previously presented  $15,547   $56,024 
Income tax expense reclassified from non-cash working capital   10,932    25,993 
Withholding taxes paid reclassified to income taxes   (1,252)   (2,113)
As currently presented  $25,227   $79,904 
           
Changes in non-cash working capital          
As previously presented  $7,499   $7,451 
Income tax expense reclassified from non-cash working capital   (10,932)   (25,993)
Withholding taxes paid reclassified to income taxes   1,252    2,113 
As currently presented  $(2,181)  $(16,429)
           
Cash provided by operating activities          
As previously presented  $23,046   $63,475 
Net effect of the above adjustments   —    — 
As currently presented  $23,046   $63,475 

 

Page 32

 

 

ORLA MINING LTD.

Notes to the Condensed Interim Consolidated Financial Statements

Three and nine months ended September 30, 2023 and 2022

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

 

28.EVENTS AFTER THE REPORTING PERIOD

 

(a)REVOLVING FACILITY PRINCIPAL PAYMENT

 

Subsequent to the reporting period, the Company repaid $25,000,000 of principal on the Credit Facility (note 14(a)).

 

(b)EXPLORATION AND EVALUATION PROPERTIES - PANAMA

 

Subsequent to the reporting period, in November 2023, the National Assembly of Panama passed Bill 1110 that included a moratorium on the granting, renewing, or extending of concessions for the exploration, extraction, or exploitation of metal mining in Panama. The Company expects that various factors, including potential court challenges and the May 2024 Panamanian general election, may impact its future strategy in Panama. We are still assessing the financial statement impact, if any, of these developments.

 

(c)EXERCISE OF STOCK OPTIONS AND WARRANTS

 

Subsequent to the reporting period, the Company issued common shares pursuant to the exercise of warrants (note 17(c)).

 

Page 33