Orla Mining may be new to the mining scene in Ontario, but the Musselwhite gold mine is not new to them.
The Vancouver company’s pending acquisition of the remote northwestern Ontario underground mine from Newmont probably sent more than a few people scurrying to Google last month to dig into the details of the expanding seven-year-old outfit.
Unlike other mining newcomers to the region, Orla isn’t buying a broken operation that was mismanaged and in dire need of cash-infused resurrection. Musselwhite is one that, by all accounts, is well-run operation that no longer fit into Newmont’s ambitions to invest in so-called Tier 1 assets.
Newmont placed Musselwhite and its Porcupine mines in Timmins up for sale last February. Orla, of which Newmont is a major shareholder, stepped up to secure an $850-million deal in November for the 27-year-old underground mine, 500 kilometres north of Thunder Bay. The deal closes in early 2025.
Orla believes Musselwhite has a lot more gold to give and, with a few operational tweaks here and there, new ownership believes it can become a low-cost and bigger producer.
“We look to make great strides on the cost side in 2025 when we take over the asset,” said Orla president-CEO Jason Simpson to Northern Ontario Business.
Simpson said Orla is stocked with industry veterans at the board and management level who know their way around Northern Ontario.
Musselwhite is familiar turf for Orla chair Chuck Jeannes, who presided over the mine as Goldcorp CEO between 2006 and 2008.
COO Andrew Cormier was project manager at AuRico Gold when the Young-Davidson mine at Matachewan was being built.
Simpson spent 15 years of his formative years in the industry working underground in Sudbury for Inco and then Vale before venturing out to manager its Labrador base metal operations in Voisey’s Bay.
The transaction catapults Orla from a company with a single mine in Mexico into mid-tier status. With another gold project under development in Nevada, Orla projects it can grow the entire company into a 500,000-ounce-a-year producer with Musselwhite now in the mix.
In a slide deck presentation posted last month, Orla is looking to lengthen Musselwhite’s mine life beyond seven years through more exploration, boost gold production from 200,000 ounces a year to 300,000 ounces, and generate more cash flow, while lowering the cost to produce an ounce of gold.
Orla projects it will lower Musselwhite’s all-in-sustaining costs (AISC) from $1,557 an ounce this year to $1,292 in 2025, then drop it further to $1,023 in 2028. The company said it will shave a few hundred dollars off the AISC by growing gold production while simultaneously reducing costs.
The all-in sustaining cost per ounce is a vital metric used by the industry to calculate the ‘all-in’ cost of a gold mining operation.
“I believe we can bring down those costs,” said Simpson.
Their forecast prompted a few industry watchers to question how Orla can pull off what a global player like Newmont couldn’t.
One online mining analyst labelled Orla’s AISC projections as unrealistic and “absurd,” considering Newmont’s lowest AISC over the last two years was $1,397 an ounce.
That’s fair comment, said Simpson, but he responds that small companies have certain advantages in being able to do things to shave costs.
“One of the benefits to being a smaller company is there’s less overhead. We will be able to, as a small company, run things differently.”
Simpson references their Camino Rojo open-pit mine in Mexico, once shelved by Goldcorp due to construction costs that escalated to more than US$700 million.
“We built it for $134 million.”
He reminds all that Newmont had its share of challenges at Musselwhite with a 2019 conveyor fire and other issues with the pandemic, which impacted the AISC.
Straight away, Simpson said Orla will see benefits from infrastructure investments made by Newmont to upgrade Musselwhite’s ventilation system and an improved cemented rock fill system, which should help lower the costs.
They’re also inheriting a profitable mine led by a good team that Orla wants to keep in place.
More than 1,000 employees and contractors work at Musselwhite. Close to 30 per cent of the workforce is Indigenous.
When Orla introduced itself last month, the company wanted to alleviate any uneasiness among its workforce by announcing that there would be no job losses and the current operations team would remain in place.
Simpson said they’ll need all of them — and possibly more workers — for their future plans ahead.
Orla wants to fill its processing mill to full capacity, which is only operating at two-thirds at 200,000 ounces produced a year, and boost it that to 300,000 ounces.
“Geology will determine whether that’s possible or not,” Simpson said.
During months of due diligence by their geologists and engineers, some favourable geology strongly suggests Musselwhite has the legs to last. They’re confident they can replace mining depletion while adding more resources to extend mine life beyond seven years.
Musselwhite has 1.5 million ounces in reserve with 1.8 million ounces of resources in the measured and indicated category at an average grade of 6.23 grams per tonne.
Mussewhite sits in the midst of a banded iron formation where mining has continued along the same plunge for 28 years. Drilling evidence indicates more gold mineralization extends out two to three kilometres from the last known resources.
Next year’s approach will be to drill in and around the deposit while stepping out over a greater distance on the 65,000-hectare property to get a better handle on the geological structure.
Orla’s 2024 exploration budget for Nevada and Mexico amounted to $35 million. Simpson said that’ll stay much the same for 2025 with $10 million to $20 million tacked on for exploration in Ontario, though they have yet to define a budget for Musselwhite.
Four drill rigs are currently at the site. Simpson said they may add one or two more.
The company also made it clear last month that it intends to honour and abide by the Musselwhite Agreement, a landmark impact benefit document signed in 1996 with area First Nations. It become an industry standard. Simpson is quite aware of it since the Voisey’s Bay agreement was based on it.
Simpson said he’s already met with local Indigenous leadership and was planning to fly up to the region again this week to meet again for a planned celebration,
“I look forward to spending the day with them.”
He said they plan on having an open conversation with the communities in the years to come on to how all the parties can derive mutual benefits through employment and business opportunities across the region.
Simpson said they see advantages to source services and supplies from local businesses, similar to what they’ve done in Mexico and Nevada.
With three properties in the fold, Simpson said they don’t abide by the philosophy that they need to acquire more assets to get bigger and avoid being taken over by a larger mining player. They’re all about finding, building and operating more mines, responsibly, he said.
“We don’t run the business trying to protect our jobs; we run the business trying to create value for shareholders. If there’s a proposal that creates value for all of our stakeholders, then it’s our responsibly to consider it.”
The next immediate steps are to integrate Musselwhite into the company, he said, and focus on making sure 2025 is a successful first year under the Orla flag.
