South Railroad Permitting And Exploration Outcomes Will Shape Future Gold Production Trajectory

Catalysts

About Orla Mining

Orla Mining is a gold producer focused on operating and developing open pit and underground assets in Canada, Mexico and the United States.

What are the underlying business or industry changes driving this perspective?

• Although the South Railroad heap leach project is advancing toward a targeted record of decision in the second quarter of 2026, any slippage in permit timing or construction readiness would delay the planned step change toward approximately half a million ounces of annual production and push out associated revenue growth.
• Despite strong early exploration success at Musselwhite, including high grade extensions along strike and at depth, converting these intercepts into mineable reserves will require sustained drilling and capital, so delays in resource definition or mine planning could postpone expected throughput gains and defer improvements to earnings.
• While Camino Rojo underground and the pit pushback are positioned to extend mine life and transition from oxide to higher value underground ore, slower than anticipated permitting or drift development in Mexico could compress the production bridge after 2027 and limit medium term revenue and margin resilience.
• Although Orla plans to self fund South Railroad construction from strong free cash flow and liquidity, simultaneous spend on growth projects and exploration across three jurisdictions heightens execution risk, and any cost escalation in mining fleets, crushing infrastructure or labor could pressure all in sustaining costs and net margins.
• Despite favorable long term demand for responsibly produced gold and growing regulatory support in jurisdictions like Nevada and Mexico, increased compliance obligations, higher environmental standards and community investment commitments could lift sustaining capital and ESG related operating costs, tempering future free cash flow and earnings growth.

Assumptions

This narrative explores a more pessimistic perspective on Orla Mining compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Orla Mining's revenue will grow by 22.0% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 7.0% today to 58.9% in 3 years time.
• The bearish analysts expect earnings to reach $825.7 million (and earnings per share of $3.16) by about December 2028, up from $53.7 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $949.7 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.5x on those 2028 earnings, down from 82.7x today. This future PE is lower than the current PE for the CA Metals and Mining industry at 21.5x.
• The bearish analysts expect the number of shares outstanding to grow by 5.42% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.34%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Successful permitting and on schedule construction at South Railroad, combined with higher recovery rates from the new owner operated crushing system, could lift consolidated production toward half a million ounces, driving sustained revenue and earnings growth above what a flat share price would imply.
• The aggressive multiyear exploration programs at Musselwhite, Camino Rojo underground and the South Carlin complex are already delivering high grade results and resource extensions, which may translate into longer mine lives and higher throughput, structurally improving future revenue and net margins.
• Stronger for longer gold prices, supported by macro trends and Orla’s ability to generate record free cash flow at current realized prices, could allow the company to self fund growth, delever and potentially introduce dividends, enhancing equity value through higher earnings and improved capital returns.
• Ongoing ESG initiatives, deepening community and government support in Mexico, Nevada and Canada, and streamlined permitting frameworks such as FAST-41 coverage may reduce regulatory risk premia and enable high value project approvals, supporting higher long term earnings and valuation multiples.
• Operational optimization at Musselwhite, including filling historically underutilized mill capacity with a mix of higher grade deep ore and more efficient upper mine stopes, along with newer lower emission fleets, could lower unit costs and lift production, expanding net margins and justifying an upward re rating in the share price.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Orla Mining is CA$17.26, which represents up to two standard deviations below the consensus price target of CA$23.91. This valuation is based on what can be assumed as the expectations of Orla Mining's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$31.89, and the most bearish reporting a price target of just CA$17.26.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $825.7 million, and it would be trading on a PE ratio of 7.5x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of CA$18.0, the analyst price target of CA$17.26 is 4.3% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.