Exhibit 99.1
Condensed Interim Consolidated Financial Statements
Three and six months ended June 30, 2021 and 2020
Presented in United States dollars
ORLA MINING LTD. Condensed Interim Consolidated Balance Sheets (Unaudited – Thousands of United States dollars) |
June 30 | December 31 | |||||||
As at | 2021 | 2020 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 51,045 | $ | 72,180 | ||||
Accounts receivable | 146 | 204 | ||||||
Prepaid expenses | 2,194 | 716 | ||||||
Restricted cash (note 8(a)) | 987 | — | ||||||
Derivative assets (note 22(b)) | 450 | — | ||||||
54,822 | 73,100 | |||||||
Restricted cash (note 8(b)) | 2,813 | 2,783 | ||||||
Value added taxes recoverable (note 7) | 19,437 | 8,587 | ||||||
Equipment (note 6) | 1,658 | 710 | ||||||
Mineral properties under development and construction (note 4) | 185,226 | 71,272 | ||||||
Mineral properties (note 5) | 82,743 | 82,743 | ||||||
TOTAL ASSETS | $ | 346,699 | $ | 239,195 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Trade and other payables (note 9) | $ | 7,168 | $ | 3,383 | ||||
Accrued liabilities (note 9) | 10,290 | 4,343 | ||||||
Newmont loan (note 11) | 9,965 | — | ||||||
27,423 | 7,726 | |||||||
Lease obligations | 267 | 142 | ||||||
Camino Rojo project loan (note 10) | 111,327 | 60,696 | ||||||
Newmont loan (note 11) | — | 9,440 | ||||||
Fresnillo obligation (note 12) | 37,800 | — | ||||||
Accrued liabilities | 125 | 92 | ||||||
Site closure provisions (note 13) | 3,118 | 518 | ||||||
TOTAL LIABILITIES | 180,060 | 78,614 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Share capital (note 16) | 234,942 | 217,948 | ||||||
Reserves | 28,704 | 29,881 | ||||||
Accumulated other comprehensive income | 4,949 | 3,002 | ||||||
Accumulated deficit | (101,956 | ) | (90,250 | ) | ||||
TOTAL SHAREHOLDERS' EQUITY | 166,639 | 160,581 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 346,699 | $ | 239,195 | ||||
Authorized for issuance by the Board of Directors on August 5, 2021.
/s/ Jason Simpson | /s/ Elizabeth McGregor | |
Director | 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 June 30 | Six months ended June 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
EXPLORATION AND EVALUATION EXPENSES (note 14) | $ | 3,761 | $ | 770 | $ | 8,672 | $ | 8,146 | ||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
Office and administrative | 358 | 194 | 867 | 379 | ||||||||||||
Professional fees | 551 | 230 | 1,053 | 406 | ||||||||||||
Regulatory and transfer agent | 213 | 66 | 417 | 148 | ||||||||||||
Salaries and benefits | 754 | 527 | 1,347 | 791 | ||||||||||||
1,876 | 1,017 | 3,684 | 1,724 | |||||||||||||
OTHER EXPENSES (INCOME) | ||||||||||||||||
Depreciation (note 6) | 35 | 382 | 68 | 625 | ||||||||||||
Share based payments (note 17) | 498 | 612 | 1,481 | 1,384 | ||||||||||||
Interest income and finance costs (note 15) | 324 | 648 | 639 | 1,260 | ||||||||||||
Foreign exchange gain | (4,771 | ) | (1,220 | ) | (1,907 | ) | (741 | ) | ||||||||
Other gains | (824 | ) | — | (931 | ) | — | ||||||||||
(4,738 | ) | 422 | (650 | ) | 2,528 | |||||||||||
LOSS FOR THE PERIOD | $ | 899 | $ | 2,209 | $ | 11,706 | $ | 12,398 | ||||||||
OTHER COMPREHENSIVE LOSS (INCOME) | ||||||||||||||||
Items that may in future periods be reclassified to profit or loss: | ||||||||||||||||
Foreign currency loss (gain) arising on translation of foreign operations | (2,116 | ) | 1,205 | (1,947 | ) | 8,366 | ||||||||||
TOTAL COMPREHENSIVE LOSS (INCOME) | $ | (1,217 | ) | $ | 3,414 | $ | 9,759 | $ | 20,764 | |||||||
Weighted average number of common shares outstanding (millions) | 237.7 | 224.4 | 235.9 | 205.9 | ||||||||||||
Loss per share - basic and diluted | $ | 0.00 | $ | 0.01 | $ | 0.05 | $ | 0.06 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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ORLA MINING LTD. Condensed Interim Consolidated Statements of Cash Flows (Unaudited – Thousands of United States dollars) |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
Cash flows provided by (used in): | 2021 | 2020 | 2021 | 2020 | ||||||||||||
(note 24) | (note 24) | |||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Loss for the period | $ | (899 | ) | $ | (2,209 | ) | $ | (11,706 | ) | $ | (12,398 | ) | ||||
Adjustments for items not affecting cash: | ||||||||||||||||
Depreciation | 35 | 202 | 68 | 445 | ||||||||||||
Share based payments | 498 | 612 | 1,481 | 1,384 | ||||||||||||
Site closure provisions charged to exploration expense | — | — | — | 15 | ||||||||||||
Interest and finance cost (note 15) | 324 | 648 | 639 | 1,260 | ||||||||||||
Other gains | (564 | ) | — | (671 | ) | — | ||||||||||
Exploration expense paid via common shares | — | — | 150 | — | ||||||||||||
Unrealized foreign exchange gain | (5,080 | ) | — | (2,106 | ) | — | ||||||||||
Changes in non-cash working capital: | ||||||||||||||||
Accounts receivable and prepaid expenses | 1,334 | (91 | ) | (1,391 | ) | (65 | ) | |||||||||
Trade and other payables | 1,658 | 26 | 2,856 | 30 | ||||||||||||
Accrued liabilities | 2,593 | 57 | 5,809 | 1,888 | ||||||||||||
Interest income received | 61 | 92 | 125 | 146 | ||||||||||||
Cash used in operating activities | (40 | ) | (663 | ) | (4,746 | ) | (7,295 | ) | ||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Proceeds from issuance of common shares | — | 54,959 | — | 54,959 | ||||||||||||
Common share issuance costs | — | (2,095 | ) | — | (2,095 | ) | ||||||||||
Proceeds from exercise of warrants | 61 | 1,547 | 13,829 | 1,547 | ||||||||||||
Proceeds from exercise of stock options | 11 | 128 | 357 | 219 | ||||||||||||
Interest paid | (2,437 | ) | (536 | ) | (4,081 | ) | (1,117 | ) | ||||||||
Advances received on the Camino Rojo project loan | 50,000 | — | 50,000 | — | ||||||||||||
Transaction costs related to the Camino Rojo project loan and Fresnillo obligation | (165 | ) | — | (289 | ) | — | ||||||||||
Lease payments | (64 | ) | (456 | ) | (106 | ) | (456 | ) | ||||||||
Cash provided by financing activities | 47,406 | 53,547 | 59,710 | 53,057 | ||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||
Purchase of equipment | (535 | ) | 39 | (748 | ) | (8 | ) | |||||||||
Mineral properties under development and construction | (24,286 | ) | (11,481 | ) | (64,568 | ) | (12,018 | ) | ||||||||
Restricted cash funded | (6 | ) | (17 | ) | (993 | ) | (21 | ) | ||||||||
Value added taxes paid | (3,510 | ) | (674 | ) | (10,584 | ) | (843 | ) | ||||||||
Cash used in investing activities | (28,337 | ) | (12,133 | ) | (76,893 | ) | (12,890 | ) | ||||||||
Effects of exchange rate changes on cash | 809 | (1,508 | ) | 794 | (1,313 | ) | ||||||||||
Net increase (decrease) in cash | 19,838 | 39,243 | (21,135 | ) | 31,559 | |||||||||||
Cash, beginning of period | 31,207 | 15,422 | 72,180 | 23,106 | ||||||||||||
CASH, END OF PERIOD | $ | 51,045 | $ | 54,665 | $ | 51,045 | $ | 54,665 | ||||||||
Cash consist of: | ||||||||||||||||
Bank current accounts and cash on hand | $ | 51,045 | $ | 54,665 | $ | 51,045 | $ | 54,665 | ||||||||
Supplemental cash flow information (note 19)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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ORLA MINING LTD. Condensed Interim Consolidated Statements of Changes in Equity (Unaudited – Thousands of United States dollars) |
Common shares | Reserves | |||||||||||||||||||||||||||||||
Number of shares (thousands) | Dollars (thousands) | Share based payments reserve | Warrants reserve | Total | Accumulated Other Comprehensive Income | Retained earnings (deficit) | Total | |||||||||||||||||||||||||
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 | 1,108 | 1,818 | — | (271 | ) | (271 | ) | — | — | 1,547 | ||||||||||||||||||||||
Options exercised | 360 | 399 | (178 | ) | — | (178 | ) | — | — | 221 | ||||||||||||||||||||||
RSUs settled | 359 | 289 | (289 | ) | — | (289 | ) | — | — | — | ||||||||||||||||||||||
Bonus shares issued | 500 | 358 | (358 | ) | — | (358 | ) | — | — | — | ||||||||||||||||||||||
Share based payments | — | — | 1,384 | — | 1,384 | — | — | 1,384 | ||||||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | (12,398 | ) | (12,398 | ) | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (8,366 | ) | — | (8,366 | ) | ||||||||||||||||||||||
Balance at June 30, 2020 | 226,029 | $ | 214,958 | $ | 8,718 | $ | 21,631 | $ | 30,349 | $ | (9,393 | ) | $ | (75,501 | ) | $ | 160,413 | |||||||||||||||
Balance at January 1, 2021 | 229,286 | $ | 217,948 | $ | 8,486 | $ | 21,395 | $ | 29,881 | $ | 3,002 | $ | (90,250 | ) | $ | 160,581 | ||||||||||||||||
Shares issued for property payments | 33 | 150 | — | — | — | — | — | 150 | ||||||||||||||||||||||||
Warrants exercised (note 16(b)) | 7,560 | 15,837 | — | (2,008 | ) | (2,008 | ) | — | — | 13,829 | ||||||||||||||||||||||
Options exercised (note 17(a)) | 572 | 562 | (205 | ) | — | (205 | ) | — | — | 357 | ||||||||||||||||||||||
RSUs settled (note 17(b)) | 406 | 445 | (445 | ) | — | (445 | ) | — | — | — | ||||||||||||||||||||||
Share based payments (note 17) | — | — | 1,481 | — | 1,481 | — | — | 1,481 | ||||||||||||||||||||||||
Loss for the period | — | — | — | — | — | — | (11,706 | ) | (11,706 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 1,947 | — | 1,947 | ||||||||||||||||||||||||
Balance at June 30, 2021 | 237,857 | 234,942 | 9,317 | 19,387 | 28,704 | 4,949 | (101,956 | ) | 166,639 | |||||||||||||||||||||||
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 six months ended June 30, 2021 and 2020 (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 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’s ability to continue as a going concern for the next twelve months involves significant judgment. As at June 30, 2021, the Company had not advanced any of its properties to commercial production and may require further financings.
Historically the Company's primary source of funding has been the issuance of equity securities for cash through prospectus offerings and private placements to sophisticated investors and institutions. We have successfully raised equity and debt financing in many of the past few years, in the form of equity financings, the exercise of warrants and options, and debt. While we believe that this success will continue, our access to exploration and construction financing is always uncertain and there can be no assurance of continued access to sources of significant equity or debt funding until we can generate cash from operations. Subsequent to the reporting period, we completed a $35 million (C$43 million) equity financing. We expect to fund operating costs of the Company over the next twelve months with cash on hand. After considering our plans to mitigate the going concern risk, we have concluded that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern for a period of twelve months from the balance sheet date.
Since the beginning of 2020, there has been 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 at June 30, 2021 and as of the date of these financial statements, mining and construction are permitted economic activities in the respective jurisdictions and the sites are operating in compliance with the country specific and Company requirements. We are monitoring the potential impacts from the pandemic on areas including equipment delivery and logistics, materials for construction and operation, other necessities, as well as construction costs and schedule, and community and government relations. Delays to construction, permit amendments and exploration programs may occur due to the COVID-19 pandemic, notwithstanding the Company having taken steps to minimize potential impacts to the projects including additional costs related to COVID-19 safety measures.
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 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 August 5, 2021, 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 six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
3. | SIGNIFICANT ACCOUNTING POLICIES |
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, 2020 and 2019.
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, 2020, except as noted here. 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, 2020.
(a) | Property, Plant and Equipment (“PP&E”): Proceeds before Intended Use |
In the process of constructing or making property, plant and equipment (including a mine) available for its intended use, we may produce and sell products generated by this PP&E. Under new accounting standards, proceeds from selling products before the related PP&E is available for use should be recognized in profit or loss, together with the costs of producing those products. We measure the cost of those products in accordance with IAS 2 “Inventories”. The new standard is effective for annual periods beginning on or after January 1, 2022, with early application permitted. We are currently assessing the effect of this new standard.
4. | MINERAL PROPERTIES UNDER DEVELOPMENT AND CONSTRUCTION |
(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 Royalty was subsequently acquired by Maverix Metals Inc. on October 29, 2020.
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. However, should Newmont decide not to elect to acquire an interest in an applicable sulphide project, Newmont would be entitled to a 2% net smelter return royalty on metals produced from the sulphide material.
The Company has received all permits and satisfied all conditions for the construction of a mine at Camino Rojo. Effective November 30, 2020, we reclassified this project to mineral properties under development and construction.
In December 2020, the Company entered into a Layback Agreement with Fresnillo plc (“Fresnillo”) and certain of its subsidiaries. Under the terms of the Layback Agreement, the Company agreed to pay Fresnillo total cash consideration of US$62.8 million in staged payments until December 2023 (note 12). The closing of the Layback Agreement occurred in February 2021. The Layback Agreement allows Orla to expand the Camino Rojo Project oxide pit onto part of Fresnillo’s mineral concession located immediately north of Orla’s property. As a result, Orla has access to oxide and transitional heap leachable mineral resources on Orla’s property below the open pit outlined in the 2019 Technical Report. The Layback Agreement provides 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.
Page 7 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
The following table summarizes the initial cost capitalized at closing:
Consideration comprised of: | ||
Cash paid | $ 25,000 | |
Fair value of future cash consideration (note 12) | 37,800 | |
$ 62,800 | ||
(b) | Development and Construction |
During the year ended December 31, 2020, we commenced construction activities at the Camino Rojo project.
At historical cost | ||||||||||||||||||||||||
Mineral properties | Deposits to vendors on construction assets | Construction in progress | Other costs capitalized | Accumulated foreign exchange on translation | Carrying value | |||||||||||||||||||
At December 31, 2020 | $ | 39,272 | $ | 28,079 | $ | 4,845 | $ | 836 | $ | (1,760 | ) | $ | 71,272 | |||||||||||
Additions | 62,800 | 10,647 | 29,113 | — | — | 102,560 | ||||||||||||||||||
Transfers | — | (34,377 | ) | 34,377 | — | — | — | |||||||||||||||||
Borrowing costs capitalized (note 4(c)) | — | — | — | 5,814 | — | 5,814 | ||||||||||||||||||
Change in site closure provision (note 13) | — | — | — | 2,487 | — | 2,487 | ||||||||||||||||||
Due to changes in exchange rates | — | — | — | — | 3,093 | 3,093 | ||||||||||||||||||
At June 30, 2021 | $ | 102,072 | $ | 4,349 | $ | 68,335 | $ | 9,137 | $ | 1,333 | $ | 185,226 | ||||||||||||
(c) | Borrowing costs capitalized |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Borrowing costs - Camino Rojo project loan (note 10) | $ | 3,066 | $ | — | $ | 5,203 | $ | — | ||||||||
Borrowing costs - Fresnillo obligations (note 12) | 488 | — | 696 | — | ||||||||||||
Interest income | (65 | ) | — | (85 | ) | — | ||||||||||
$ | 3,489 | $ | — | $ | 5,814 | $ | — | |||||||||
Page 8 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
5. | MINERAL PROPERTIES |
The Company’s mineral properties consist of the Cerro Quema Project, and the Monitor Gold Project. The Camino Rojo Project is classified under Mineral Properties Under Development and Construction (see note 4).
(a) | 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. 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.
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 and are still under review. However, we continue to receive ongoing drilling, water use, environmental and other permits, and have paid concession taxes, and issued the annual reports in the normal course.
Subsequent to the reporting period, the Company published the results of a Pre-Feasibility Study on the Cerro Quema Project. Refer to the Management Discussion and Analysis for the period ended June 30, 2021 for further details.
(b) | 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 2021, the payments required under the option agreements consist of $150,000 in share issuance (issued), $60,000 in advance royalty payments (paid), and $125,000 in work commitment (completed). To maintain the option agreements in good standing, minimum payments and work commitments are required each year until 2038.
(c) | Mineral property interest assets |
Cerro Quema | Monitor Gold | Total | ||||||||||
Acquisition costs | ||||||||||||
At December 31, 2020 and June 30, 2021 | $ | 82,429 | $ | 314 | $ | 82,743 | ||||||
Page 9 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
6. | EQUIPMENT |
The following table summarizes information as at and for the six months ended June 30, 2021:
Cost | ||||||||||||||||
December 31, 2020 | Changes during the period | Effect of exchange rate changes | June 30, 2021 | |||||||||||||
Buildings and improvements | $ | — | $ | 68 | $ | 1 | $ | 69 | ||||||||
Machinery and equipment | 392 | 527 | 9 | 928 | ||||||||||||
Office equipment | 56 | 92 | 2 | 150 | ||||||||||||
Computers and software | 320 | 57 | 4 | 381 | ||||||||||||
Vehicles | 59 | — | — | 59 | ||||||||||||
Right of use assets buildings | 214 | — | 6 | 220 | ||||||||||||
Right of use assets vehicles | 124 | 352 | 7 | 483 | ||||||||||||
Total | $ | 1,165 | $ | 1,096 | $ | 29 | $ | 2,290 | ||||||||
Accumulated depreciation | ||||||||||||||||
December 31, 2020 | Changes during the period | Effect of exchange rate changes | June 30, 2021 | |||||||||||||
Buildings and improvements | $ | — | $ | 3 | $ | — | $ | 3 | ||||||||
Machinery and equipment | 235 | 17 | — | 252 | ||||||||||||
Office equipment | 18 | 8 | — | 26 | ||||||||||||
Computers and software | 133 | 28 | — | 161 | ||||||||||||
Vehicles | 11 | 5 | — | 16 | ||||||||||||
Right of use assets buildings | 55 | 49 | — | 104 | ||||||||||||
Right of use assets vehicles | 3 | 66 | 1 | 70 | ||||||||||||
Total | $ | 455 | $ | 176 | $ | 1 | $ | 632 | ||||||||
Net book value | ||||||||
December 31, 2020 | June 30, 2021 | |||||||
Buildings and improvements | $ | — | $ | 66 | ||||
Machinery and equipment | 157 | 676 | ||||||
Office equipment | 38 | 124 | ||||||
Computers and software | 187 | 220 | ||||||
Vehicles | 48 | 43 | ||||||
Right of use assets buildings | 159 | 116 | ||||||
Right of use assets vehicles | 121 | 413 | ||||||
Total | $ | 710 | $ | 1,658 | ||||
Page 10 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
7. | VALUE ADDED TAXES (“VAT”) RECOVERABLE |
Our Mexican entities pay value added taxes (called “IVA” in Mexico) on certain goods and services we purchase.
Value added taxes 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 amount and timing of refunds is uncertain. Accordingly, we have classified Mexican value added taxes recoverable as long term.
The IVA recoverable amounts include IVA paid on the acquisition of the Camino Rojo project ($3.6 million) in 2017 and the acquisition of the Layback Area ($4.0 million) in 2021. The remainder relates to operating and construction costs from 2017 to date.
8. | RESTRICTED CASH |
(a) | Current |
June 30, 2021 | December 31, 2020 | |||||||
Margin balance on deposit pursuant to currency contracts (note 22(b)) | $ | 987 | $ | — | ||||
(b) | Non-current |
June 30, 2021 | December 31, 2020 | |||||||
Environmental bonds | $ | 2,409 | $ | 2,392 | ||||
Severance funds | 335 | 323 | ||||||
Other | 69 | 68 | ||||||
$ | 2,813 | $ | 2,783 | |||||
Page 11 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
9. | TRADE AND OTHER PAYABLES AND ACCRUED LIABILITIES |
(a) | Trade and other payables |
June 30, 2021 | December 31, 2020 | |||||||
Trade payables | $ | 5,734 | $ | 2,583 | ||||
Payroll related liabilities | 451 | 658 | ||||||
Lease obligations - current | 263 | 131 | ||||||
Interest payable - Fresnillo obligation (note 12) | 696 | — | ||||||
Other | 24 | 11 | ||||||
$ | 7,168 | $ | 3,383 | |||||
(b) | Accrued liabilities |
June 30, 2021 | December 31, 2020 | |||||||
Construction related | 7,108 | 1,082 | ||||||
Land and water fees | $ | 1,866 | $ | 1,852 | ||||
Payroll related | 514 | 725 | ||||||
Other | 802 | 684 | ||||||
$ | 10,290 | $ | 4,343 |
10. | 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, to be used for the development of the Camino Rojo project, funding a portion of the Layback Agreement (note 4(a)), and normal course corporate purposes. The Company has drawn the first tranche of US$25 million, the second tranche of US$50 million and the third tranche of US$50 million on December 18, 2019, October 30, 2020, and April 27, 2021, respectively. No further advances are available under this Credit Facility.
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 repayments 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.
Commencing December 1, 2020, we capitalized the interest on this loan to mineral properties under development and construction. During the six months ended June 30, 2021, we capitalized $5.2 million (year ended December 31, 2020 - $0.7 million) (note 4).
Page 12 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
Loan advances | Transaction costs | Net | ||||||||||
At December 31, 2020 | $ | 75,000 | $ | (14,304 | ) | $ | 60,696 | |||||
Advances during the period | 50,000 | — | 50,000 | |||||||||
Cash transaction costs | — | (165 | ) | (165 | ) | |||||||
Accretion during the period, capitalized (note 4(c)) | 4,013 | 1,190 | 5,203 | |||||||||
Cash interest paid | (4,013 | ) | — | (4,013 | ) | |||||||
Foreign exchange | — | (394 | ) | (394 | ) | |||||||
At June 30, 2021 | $ | 125,000 | $ | (13,673 | ) | $ | 111,327 | |||||
11. | 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 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 Mexican pesos had been advanced by Newmont under this agreement. No further advances in respect of this loan are expected.
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. As at June 30, 2021, we reclassified this loan to current, from long term.
Mexican pesos (thousands) | US dollars (thousands) | US dollars (thousands) | ||||||||||
Undiscounted | Undiscounted | Discounted | ||||||||||
At December 31, 2020 | 219,466 | $ | 11,002 | $ | 9,440 | |||||||
Accretion during the period (note 15) | — | — | 668 | |||||||||
Modification gains arising from changes in estimates | — | — | (221 | ) | ||||||||
Foreign exchange loss | — | 81 | 78 | |||||||||
At June 30, 2021 | 219,466 | $ | 11,083 | $ | 9,965 | |||||||
12. | FRESNILLO OBLIGATION |
Pursuant to the terms of the Layback Agreement (note 4(a)), we agreed to pay Fresnillo total cash consideration of US$62.8 million through a staged payment schedule:
i. | US$25 million upon closing of the transaction (paid February 22, 2021); |
ii. | US$15 million upon the earlier of December 1, 2022, and 12 months following the commencement of commercial production at the Camino Rojo Project; and |
iii. | US$22.8 million upon the earlier of December 1, 2023, and 24 months following the commencement of commercial production at the Camino Rojo Project. |
The amounts payable after February 22, 2021 bear interest at 5% per annum, payable quarterly. We capitalize the interest on this loan to “Mineral Properties under Development and Construction”. During the six months ended June 30, 2021, we capitalized $0.7 million (year ended December 31, 2020 - nil) (note 4).
Page 13 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
Total | ||||
At January 1, 2021 | $ | — | ||
Initial recognition | 37,800 | |||
Accretion during the period, capitalized (note 4(c)) | 696 | |||
At June 30, 2021 | $ | 38,496 | ||
Presented as: | ||||
Fresnillo obligation - long term | $ | 37,800 | ||
Trade and other payables (note 9(a)) | 696 | |||
At June 30, 2021 | $ | 38,496 | ||
13. | SITE CLOSURE PROVISIONS |
Camino Rojo Project | Cerro Quema Project | Total | ||||||||||
At December 31, 2020 | $ | 175 | $ | 343 | $ | 518 | ||||||
Increase in estimated cash flows resulting from current activities | 2,487 | — | 2,487 | |||||||||
Foreign exchange | 113 | — | 113 | |||||||||
At June 30, 2021 | $ | 2,775 | $ | 343 | $ | 3,118 | ||||||
14. | EXPLORATION AND EVALUATION EXPENSES |
Three months ended June 30, 2021 | Camino Rojo | Cerro Quema | Monitor Gold | Other | Total | |||||||||||||||
Assays and analysis | $ | 145 | $ | 44 | $ | — | $ | — | $ | 189 | ||||||||||
Drilling | 307 | 29 | — | — | 336 | |||||||||||||||
Geological | 342 | 370 | — | — | 712 | |||||||||||||||
Engineering | 6 | 565 | — | — | 571 | |||||||||||||||
Environmental | 4 | 75 | — | — | 79 | |||||||||||||||
Community and government | — | 80 | — | — | 80 | |||||||||||||||
Land, water use, and claims | 810 | — | — | — | 810 | |||||||||||||||
Project management | — | — | — | — | — | |||||||||||||||
Project review | — | — | — | 5 | 5 | |||||||||||||||
Site activities | 65 | 317 | — | — | 382 | |||||||||||||||
Site administration | 202 | 394 | 1 | — | 597 | |||||||||||||||
$ | 1,881 | $ | 1,874 | $ | 1 | $ | 5 | $ | 3,761 | |||||||||||
Page 14 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
Six months ended June 30, 2021 | Camino Rojo | Cerro Quema | Monitor Gold | Other | Total | |||||||||||||||
Assays and analysis | $ | 332 | $ | 78 | $ | 1 | $ | — | $ | 411 | ||||||||||
Drilling | 1,240 | 175 | — | — | 1,415 | |||||||||||||||
Geological | 706 | 672 | 1 | — | 1,379 | |||||||||||||||
Engineering | 12 | 1,085 | — | — | 1,097 | |||||||||||||||
Environmental | 8 | 191 | — | — | 199 | |||||||||||||||
Community and government | 4 | 217 | — | — | 221 | |||||||||||||||
Land, water use, and claims | 1,850 | — | 210 | — | 2,060 | |||||||||||||||
Project management | — | 7 | — | — | 7 | |||||||||||||||
Project review | — | — | — | 17 | 17 | |||||||||||||||
Site activities | 134 | 617 | — | — | 751 | |||||||||||||||
Site administration | 339 | 750 | 26 | — | 1,115 | |||||||||||||||
$ | 4,625 | $ | 3,792 | $ | 238 | $ | 17 | $ | 8,672 | |||||||||||
Page 15 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
Three months ended June 30, 2020 | Camino Rojo | Cerro Quema | Monitor Gold | Other | Total | |||||||||||||||
Assays and analysis | $ | 14 | $ | — | $ | — | $ | — | $ | 14 | ||||||||||
Geological | 168 | 37 | — | — | 205 | |||||||||||||||
Engineering | 230 | 22 | — | — | 252 | |||||||||||||||
Environmental | (4 | ) | 20 | — | — | 16 | ||||||||||||||
Community and government | (29 | ) | 100 | — | — | 71 | ||||||||||||||
Land, water use, and claims | (68 | ) | — | — | — | (68 | ) | |||||||||||||
Site activities | 19 | 94 | — | — | 113 | |||||||||||||||
Site administration | 76 | 91 | — | — | 167 | |||||||||||||||
$ | 406 | $ | 364 | $ | — | $ | — | $ | 770 | |||||||||||
Six months ended June 30, 2020 | Camino Rojo | Cerro Quema | Monitor Gold | Other | Total | |||||||||||||||
Assays and analysis | $ | 28 | $ | — | $ | 1 | $ | — | $ | 29 | ||||||||||
Geological | 352 | 68 | — | — | 420 | |||||||||||||||
Engineering | 474 | 56 | — | — | 530 | |||||||||||||||
Environmental | 54 | 37 | — | — | 91 | |||||||||||||||
Community and government | 2,341 | 180 | — | — | 2,521 | |||||||||||||||
Land, water use, and claims | 3,120 | — | 40 | — | 3,160 | |||||||||||||||
Project review | — | — | — | 6 | 6 | |||||||||||||||
Site activities | 167 | 294 | — | — | 461 | |||||||||||||||
Site administration | 550 | 363 | — | — | 913 | |||||||||||||||
Recognition of reclamation obligation | 15 | — | — | — | 15 | |||||||||||||||
$ | 7,101 | $ | 998 | $ | 41 | $ | 6 | $ | 8,146 | |||||||||||
15. | INTEREST INCOME AND FINANCE COSTS |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Accretion on Camino Rojo project loan (note 10) | $ | — | $ | 703 | $ | — | $ | 1,304 | ||||||||
Accretion on Newmont loan (note 11) | 340 | (8 | ) | 668 | 57 | |||||||||||
Interest expense on leases | 8 | 40 | 15 | 48 | ||||||||||||
Interest income | (24 | ) | (87 | ) | (44 | ) | (149 | ) | ||||||||
$ | 324 | $ | 648 | $ | 639 | $ | 1,260 | |||||||||
Page 16 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
16. | SHARE CAPITAL |
(a) | Issued share capital |
On February 5, 2021, the Company issued 33,000 common shares at a total fair value of $150,000 in respect of the annual share consideration in connection with the Company’s option agreement to acquire the Monitor Gold project.
Refer to the Condensed Interim Consolidated Statements of Changes in Equity for details of other share issuances during the six month periods ended June 30, 2021 and 2020.
Subsequent to the reporting period, the Company issued 9,085,263 common shares at a price of C$4.75 per common share for gross proceeds of C$ 43.2 million ($35.0 million).
(b) | Warrants |
The following summarizes information about the number of warrants outstanding during the period.
Expiry date | Exercise price | December 31 2020 | Exercised | Expired | June 30 2021 | |||||||||||||||
February 15, 2021 | C$ 2.35 | 7,782,994 | (7,439,744 | ) | (343,250 | ) | — | |||||||||||||
July 8, 2021 | C$ 0.62 | 370,000 | (120,000 | ) | — | 250,000 | ||||||||||||||
June 12, 2022 | C$ 1.65 | 4,992,500 | — | — | 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 | 48,645,494 | (7,559,744 | ) | (343,250 | ) | 40,742,500 | ||||||||||||||
Weighted average exercise price | C$ 2.64 | C$ 2.32 | C$ 2.35 | C$ 2.70 | ||||||||||||||||
Subsequent to the reporting period, the Company issued 250,000 common shares for proceeds of C$155,000 ($125,000) pursuant to the exercise of warrants.
17. | SHARE-BASED PAYMENTS EXPENSE |
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 June 30 | Six months ended June 30 | ||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Stock options | $ | 292 | $ | 398 | $ | 890 | $ | 776 | ||||||||
Restricted share units | 206 | 138 | 350 | 260 | ||||||||||||
Deferred share units | — | — | 241 | 217 | ||||||||||||
Bonus shares | — | 76 | — | 131 | ||||||||||||
Share based payments expense | $ | 498 | $ | 612 | $ | 1,481 | $ | 1,384 | ||||||||
Page 17 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (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 December 31, 2020 | 9,959,927 | 1.60 | ||||||
Granted | 628,347 | 4.80 | ||||||
Exercised | (572,400 | ) | 0.79 | |||||
Forfeited | (33,333 | ) | 1.39 | |||||
As at June 30, 2021 | 9,982,541 | C$ 1.85 | ||||||
Vested, December 31, 2020 | 7,774,007 | C$ 1.39 | ||||||
Vested, June 30, 2021 | 8,601,436 | C$ 1.55 | ||||||
The options granted during the six months ended June 30, 2021 had an aggregate grant date fair value of $972,000 (C$1,205,000) which was determined using a Black Scholes option pricing model with the following weighted average assumptions:
• | expected volatility 45%, expected life 5 years, Canadian dollar risk free interest rate 0.95%, dividends nil. |
The options granted during the six months ended June 30, 2020 had an aggregate grant date fair value of $1,153,600 (C$1,575,000) which was determined using a Black Scholes option pricing model with the following weighted average assumptions:
• | expected volatility 47%, expected life 5 years, Canadian dollar risk free interest rate 0.6%, dividends nil. |
(b) | Restricted Share Units |
Number of RSUs outstanding: | Number vesting in the year | |||||||||||||||||||||||
Total | 2021 | 2022 | 2023 | 2024 | Beyond 2024 | |||||||||||||||||||
Outstanding, December 31, 2020 | 921,356 | 448,607 | 365,935 | 106,814 | — | — | ||||||||||||||||||
Awarded during the period | 235,091 | — | 78,366 | 78,365 | 78,360 | — | ||||||||||||||||||
Vested and settled during the period | (405,941 | ) | (405,941 | ) | — | — | — | — | ||||||||||||||||
Outstanding, June 30, 2021 | 750,506 | 42,666 | 444,301 | 185,179 | 78,360 | — | ||||||||||||||||||
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.
Subsequent to the reporting period, RSUs were settled by the issuance of 36,000 common shares.
Page 18 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (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, 2020 | 644,525 | |||
Awarded | 62,503 | |||
Outstanding, June 30, 2021 | 707,028 | |||
DSUs vested at June 30, 2021 | 707,028 | |||
DSUs are valued based on the closing price of the Company’s common shares on the trading day immediately prior to award. DSUs may only be settled when the DSU holder ceases to be a director of the Company.
(d) | 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 vesting period was June 19, 2017 to June 18, 2020, and these bonus shares are fully vested, but have not yet been issued. The bonus shares will become issuable (1) 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.
18. | 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, 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 June 30 | Six months ended June 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Salaries | $ | 624 | $ | 596 | $ | 1,055 | $ | 732 | ||||||||
Directors’ fees | 47 | 41 | 92 | 84 | ||||||||||||
Share based payments | 357 | 489 | 1,138 | 1,119 | ||||||||||||
Total | $ | 1,028 | $ | 1,126 | $ | 2,285 | $ | 1,935 | ||||||||
Page 19 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
(b) | Transactions |
The Company had no other significant transactions with related parties, other than with key management personnel as described above, during the three and six months ended June 30, 2021, or during the year ended December 31, 2020.
(c) | Outstanding balances at the Reporting Date |
At June 30, 2021, estimated accrued short term incentive compensation to key management personnel totaled $363,000 and was included in accrued liabilities (December 31, 2020 - $773,000).
19. | SUPPLEMENTAL CASH FLOW INFORMATION |
The non-cash investing and financing activities of the Company include the following:
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Financing activities | ||||||||||||||||
Stock options exercised, credited to share capital with an offset to reserves | $ | 4 | $ | 94 | $ | 205 | $ | 179 | ||||||||
Warrants exercised, credited to share capital with an offset to reserves | 33 | — | 2,008 | 271 | ||||||||||||
Common shares issued on maturity of RSUs, credited to share capital with an offset to reserves | 41 | 66 | 445 | 289 | ||||||||||||
Common shares issued on vesting of bonus shares, credited to share capital with an offset to reserves | — | — | — | 357 | ||||||||||||
Fresnillo obligation, credited, with an offset to mineral properties | — | — | 37,800 | — | ||||||||||||
Investing activities | ||||||||||||||||
Initial recognition of right of use assets with an offset to lease obligation | 50 | (80 | ) | 352 | 537 | |||||||||||
Page 20 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
20. | 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 the Mexican project, the Panamanian project, 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. The Mexican project is currently in construction and is expected to generate revenue in 2022 while the Panamanian project is 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.
(i) | Loss by geographic area |
Mexico | Panama | USA | Canada | Total | ||||||||||||||||
Six months ended June 30, 2021 | ||||||||||||||||||||
Exploration and evaluation expenses (note 14) | $ | 4,625 | $ | 3,792 | $ | 238 | $ | 17 | $ | 8,672 | ||||||||||
General and administrative expenses | — | — | — | 3,684 | 3,684 | |||||||||||||||
Depreciation | — | 9 | — | 59 | 68 | |||||||||||||||
Share based payments | — | — | — | 1,481 | 1,481 | |||||||||||||||
Interest and finance costs | 669 | — | — | (30 | ) | 639 | ||||||||||||||
Foreign exchange loss (gain) | (2,337 | ) | — | — | 430 | (1,907 | ) | |||||||||||||
Other (gains) | (221 | ) | — | — | (710 | ) | (931 | ) | ||||||||||||
Loss for the period | $ | 2,736 | $ | 3,801 | $ | 238 | $ | 4,931 | $ | 11,706 | ||||||||||
Mexico | Panama | USA | Canada | Total | ||||||||||||||||
Six months ended June 30, 2020 | ||||||||||||||||||||
Exploration and evaluation expenses (note 14) | $ | 7,101 | $ | 998 | $ | 41 | $ | 6 | $ | 8,146 | ||||||||||
General and administrative expenses | — | — | — | 1,724 | 1,724 | |||||||||||||||
Depreciation | 593 | 12 | — | 20 | 625 | |||||||||||||||
Share based payments | — | — | — | 1,384 | 1,384 | |||||||||||||||
Interest and finance costs | 102 | — | — | 1,158 | 1,260 | |||||||||||||||
Foreign exchange loss (gain) | (1,177 | ) | — | — | 436 | (741 | ) | |||||||||||||
Loss for the period | 6,619 | 1,010 | 41 | 4,728 | 12,398 | |||||||||||||||
Page 21 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
(ii) | Assets and liabilities by geographic area |
Mexico | Panama | USA | Canada | Total | ||||||||||||||||
At June 30, 2021 | ||||||||||||||||||||
Equipment | $ | 1,459 | $ | 65 | $ | — | $ | 134 | $ | 1,658 | ||||||||||
Mineral properties under development and construction | 185,226 | — | — | — | 185,226 | |||||||||||||||
Mineral property interests | — | 82,429 | 314 | — | 82,743 | |||||||||||||||
Total assets | 215,946 | 83,185 | 314 | 47,254 | 346,699 | |||||||||||||||
Total liabilities | (66,420 | ) | (658 | ) | (25 | ) | (112,957 | ) | (180,060 | ) | ||||||||||
Mexico | Panama | USA | Canada | Total | ||||||||||||||||
At December 31, 2020 | ||||||||||||||||||||
Equipment | $ | 463 | $ | 73 | $ | — | $ | 174 | $ | 710 | ||||||||||
Mineral properties under development and construction | 71,272 | — | — | — | 71,272 | |||||||||||||||
Mineral property interests | — | 82,429 | 314 | — | 82,743 | |||||||||||||||
Total assets | 82,781 | 83,260 | 314 | 72,840 | 239,195 | |||||||||||||||
Total liabilities | (15,530 | ) | (634 | ) | — | (62,450 | ) | (78,614 | ) | |||||||||||
21. | 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.
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 or repay outstanding debt, or acquire or dispose of assets. In order to prudently manage our uses of capital until we can generate revenue, we do not currently pay dividends.
At the end of 2019, we entered into a $125 million project loan (note 10) in respect of the Camino Rojo project pursuant to which we had drawn $125 million as of June 30, 2021 (December 31, 2020 - $75 million). The project loan requires us to maintain a minimum working capital (adjusted for certain items) of $5 million.
During the six months ended June 30, 2021, we entered into participating forward contracts for the purchase of Mexican pesos for the construction of the Camino Rojo Mine in order to decrease our exposure to adverse movements in the peso during the construction phase (see note 22(b)).
Other than entering into these peso forward contracts, there were no changes to our policy for capital management during the period ended June 30, 2021.
Our investment policy is to invest the Company’s excess cash in low risk financial instruments such as term deposits and savings accounts with major Canadian banks. By using this strategy, the Company preserves its cash resources and is able to 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.
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 other investors. We regularly review and consider financing alternatives to fund the Company’s ongoing exploration and development activities until these activities can be funded from ongoing cash flow from our mining operations.
Page 22 |
ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
22. | 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.
We determine whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.
At June 30, 2021, the carrying values and fair values of our financial instruments by category were as follows:
Fair value | ||||||||||||||||||||||||||
Classification | Carrying value | Quoted prices in active market for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Approximate fair value due to short term nature of the instrument | Total Fair Value | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||
Cash and cash equivalents | FVTPL | $ | 51,045 | $ | 51,045 | $ | — | $ | — | $ | — | $ | 51,045 | |||||||||||||
Accounts receivable | Amortized cost | 47 | 26 | — | — | 21 | 47 | |||||||||||||||||||
Derivative asset | FVTPL | 450 | — | 450 | — | — | 450 | |||||||||||||||||||
Restricted funds | Amortized cost | 3,800 | — | 3,800 | — | — | 3,800 | |||||||||||||||||||
$ | 55,342 | 51,071 | $ | 4,250 | $ | — | $ | 21 | $ | 55,342 | ||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||
Trade payables | Amortized cost | $ | 5,734 | $ | — | $ | — | $ | — | $ | 5,734 | $ | 5,734 | |||||||||||||
Interest payable | Amortized cost | 696 | — | 696 | — | — | 696 | |||||||||||||||||||
Lease obligations | Amortized cost | 530 | — | 530 | — | — | 530 | |||||||||||||||||||
Camino Rojo project loan | Amortized cost | 111,327 | — | 117,473 | — | — | 117,473 | |||||||||||||||||||
Newmont loan | Amortized cost | 9,965 | — | 10,234 | — | — | 10,234 | |||||||||||||||||||
Fresnillo obligation | Amortized cost | 37,800 | — | 37,800 | — | — | 37,800 | |||||||||||||||||||
$ | 166,052 | $ | — | $ | 166,733 | $ | — | $ | 5,734 | $ | 172,467 | |||||||||||||||
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ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
At December 31, 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 | Total Fair Value | ||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||
Cash and cash equivalents | FVTPL | $ | 72,180 | $ | 72,180 | $ | — | $ | — | $ | — | $ | 72,180 | |||||||||||||
Accounts receivable | Amortized cost | 39 | 25 | — | — | 14 | 39 | |||||||||||||||||||
Restricted funds | Amortized cost | 2,783 | — | 2,783 | — | — | 2,783 | |||||||||||||||||||
$ | 75,002 | 72,205 | $ | 2,783 | $ | — | $ | 14 | $ | 75,002 | ||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||
Trade payables | Amortized cost | $ | 2,583 | $ | — | $ | — | $ | — | $ | 2,583 | $ | 2,583 | |||||||||||||
Lease obligations | Amortized cost | 274 | — | 274 | — | — | 274 | |||||||||||||||||||
Camino Rojo project loan | Amortized cost | 60,696 | — | 66,443 | — | — | 66,443 | |||||||||||||||||||
Newmont loan | Amortized cost | 9,440 | — | 9,875 | — | — | 9,875 | |||||||||||||||||||
$ | 72,993 | $ | — | $ | 76,592 | $ | — | $ | 2,583 | $ | 79,175 | |||||||||||||||
The fair value of the Camino project loan at June 30, 2021 was estimated at $117.5 million (December 31, 2020 - $66.4 million) using a discount rate of 10.8% (December 31, 2020 - 10.8%). The fair value of the Newmont loan at June 30, 2021 was estimated at $10.2 million (December 31, 2020 - $9.9 million) using an exchange rate of 19.80 MXN/USD (December 31, 2020 - 19.95 MXN/USD) and a discount rate of 11.2% (December 31, 2020 - 10.5%).
(b) | Derivative financial instruments |
The Company entered into participating forward contracts for the purchase of Mexican pesos for use during the construction of the Camino Rojo Mine. The individual contracts mature monthly from April 2021 to December 2021. At June 30, 2021, the aggregate notional amount of these contracts was US$25,200,000 and the aggregate committed amount was US$12,600,000. The weighted average strike rate was 20.35 Mexican pesos per 1 US dollar.
We estimated the fair value of these contracts as an asset of $450,000 as at June 30, 2021 (December 31, 2020 - nil). We recognized them as a derivative asset and have included in “Other gains” in the statement of loss and comprehensive loss.
We have classified these as FVTPL.
23. | COMMITMENTS AND CONTINGENCIES |
(a) | Commitments |
The Company has issued purchase orders for construction of the Camino Rojo mine. At June 30, 2021, these outstanding purchase orders totaled approximately $31,981,000 (December 31, 2020 - $49,050,000), which we expect will be filled in the next 12 months.
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ORLA MINING LTD. Notes to the Condensed Interim Consolidated Financial Statements Three and six months ended June 30, 2021 and 2020 (Unaudited – United States dollars, unless otherwise stated). All currency figures in tables are in thousands, except per-share amounts) |
In the event of a change in control, the Company is committed to severance payments amounting to approximately $3,300,000 (December 31, 2020 - $3,000,000) 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.
24. | RECLASSIFICATION |
To provide greater comparability, we have reclassified interest and lease payments previously presented in the three and six month periods ended June 30, 2020 to conform to the presentation used in the current year, as follows:
Three months ended June 30, 2020 | Six months ended June 30, 2020 | |||||||||||||||
Operating activities | Financing activities | Operating activities | Financing activities | |||||||||||||
As originally presented | $ | (1,655 | ) | $ | 54,539 | $ | (8,868 | ) | $ | 54,630 | ||||||
Reclassify Interest paid on project loan | 536 | (536 | ) | 1,117 | (1,117 | ) | ||||||||||
Reclassify lease payments | 456 | (456 | ) | 456 | (456 | ) | ||||||||||
As restated | $ | (663 | ) | $ | 53,547 | $ | (7,295 | ) | $ | 53,057 | ||||||
25. | EVENTS AFTER THE REPORTING PERIOD |
(a) | Equity financing |
On July 14, 2021, the Company closed an equity financing of 9,085,263 common shares at a price of C$4.75 per common share for aggregate gross proceeds to the Company of C$43,155,000 ($35,000,000).
(b) | Share issuances |
Subsequent to the reporting period, the Company issued common shares pursuant to the settlement of RSUs (note 17(b)) and exercise of warrants (note 16(b)).
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