Orla to start South Railroad gold project build in Nevada this year

[Ben Graham]

Orla Mining (TSX: OLA; NYSE: ORLA) said it will kick off construction at its South Railroad gold project in Nevada after an updated feasibility study showed costs doubled in three years while resources increased.

Capital costs rose to $395 million from $190 million in a 2022 study due to inflation, new two-stage crushing and water management, Orla said on Thursday.  Full construction at South Railroad should start by mid-year, following final project permits and detailed engineering works.

Located 700 km northeast of Las Vegas, South Railroad is a key asset for Orla as the Vancouver-based miner works to reach annual gold production of 500,000 ounces. The project covers 250 sq. km on Nevada’s Carlin Trend, offering potential for resource growth and new discoveries. Orla acquired the project from Gold Standard Ventures in 2022.

With Orla’s board having approved full construction, permits are “the last box to tick,” National Bank Financial mining analyst Alex Terentiew said Thursday in a note. He expects federal and state approvals to be issued in mid-2026, with first production starting in 2028.

Cost inflation

Development will be financed through operating cash flow and cash on hand, Orla says. It forecasts $202 million of life-of-mine sustaining capital.

Based on a 5% discount rate, a gold price of $3,100 per oz. and a silver price of $36.50 per oz., South Railroad now has an after-tax net present value (NPV) of $783 million and an internal rate of return (IRR) of 48%, Orla said. With a gold price of $4,500, the NPV rises to $1.7 billion and the IRR to 95%.

South Railroad holds 66.6 million tonnes of proven and probable reserves grading 0.71 gram gold per tonne and 5.1 grams silver for contained metal of 1.52 million oz. gold and 6.2 million oz. silver, according to a September resource.

Measured and indicated resources have increased since 2022 by 206,000 oz. in oxide and 469,000 oz. in sulphide, according to the company.

Building block

Orla envisions average annual gold production at South Railroad of 104,000 oz. over the projected 10-year life at an average all-in sustaining cost of $1,505 per ounce. Annual output over the first five years will average 130,000 ounces.

“This optimized South Railroad feasibility study reaffirms the strength of the project and the basis upon which we will move forward in Nevada,” CEO Jason Simpson said. “South Railroad is more than our next project; it is our next building block of growth as we solidify our place in Nevada.”

Crews have completed 57,800 metres of drilling at South Railroad over the past three years to expand the resource, including 18,000 metres last year. “Aggressive” exploration is planned for 2026, the company says.

Orla shares fell 1.1% to C$20.34 Thursday morning in Toronto, giving the company a market value of about C$6.9 billion ($5 billion).