Most gold producers talk about extending mine life through expanding open pit boundaries. Orla Mining just flipped the script entirely.
The company’s Camino Rojo Underground PEA isn’t just another resource expansion: it’s a fundamental recalibration of what capital-efficient gold development looks like in 2026. While peers chase bulk tonnage at declining grades, Orla’s betting on selective underground mining of high-grade material. The numbers suggest they’re onto something.
The Economics That Actually Matter
The preliminary assessment delivers a post-tax NPV of $1.3 billion at $3,100 per ounce gold. That’s at a 5% discount rate. Internal rate of return clocks in at 30%.
Those aren’t speculative blue-sky figures. They’re based on an 8,000 tonnes per day processing operation targeting 4.2 million tonnes grading 2.50 g/t gold. The underground resource contains an estimated 0.34 million ounces, but the real story is in the margin structure.
Average cash costs per ounce are projected significantly below current industry benchmarks for comparable underground operations. The technical design incorporates selective flotation circuits producing three separate concentrates: a complexity that typically kills margins but here creates value through metallurgical optimization.
The capital efficiency is where this gets interesting. Initial capex is pegged substantially lower than comparable underground developments at similar production scales. That’s not accounting magic. It’s sequencing.
Capital Discipline Meets Geological Reality
Orla’s approach derisks capital deployment through a phased underground development program running through 2026. Instead of committing to full-scale construction immediately, they’re systematically validating grade continuity, metallurgical response, and geotechnical parameters.
The 2026 exploration program alone represents 30,250 metres of drilling focused on extending the known underground footprint. Recent results at Musselwhite: where Orla operates its flagship underground mine in Ontario: demonstrate what that exploration discipline delivers: 5.0 metres at 5.57 g/t gold down-plunge of current operations and 9.0 metres at 22.1 g/t in the Redwings zone.
That’s not resource-stage speculation. Those intercepts extend the mineable envelope by two kilometers beyond existing infrastructure. At Camino Rojo, the same methodology applies: prove it, then build it.
The capital expenditure profile reflects this sequencing. Rather than front-loading hundreds of millions into underground development before metallurgical certainty, Orla’s staged approach allows course corrections based on actual operational data. That’s particularly relevant for a project utilizing selective flotation: a process flow that looks excellent in the lab but can hemorrhage capital if metal recoveries don’t match predictions at scale.
The company produced 300,620 ounces across its portfolio in 2025 and is guiding toward 360,000 ounces for 2026. Camino Rojo Underground isn’t modeled as immediate production: it’s positioned as the next increment in a deliberately scaled production profile. That timing matters for capital allocation.
Leverage That Compounds
Here’s what the PEA economics reveal when you stress-test gold price scenarios: the underground project delivers exponential returns above $3,000 per ounce.
At $2,800 gold, the IRR compresses to the low-20% range. Not terrible, but competitive with dozens of other mid-tier development projects. At $3,100: the PEA’s base case: you’re at 30% IRR. At $3,400 gold, which is not remotely outlandish given current macro conditions, the returns accelerate materially.
That’s leverage. And it’s driven by the grade-margin relationship inherent to underground selective mining.
Open pit operations scale production but typically see margin compression at higher gold prices because costs inflate proportionally: more material moved, higher strip ratios, escalating fuel and contractor expenses. Underground selective mining isolates high-grade zones and avoids the tonnage treadmill. Fixed costs spread across fewer, higher-value ounces.
The math becomes particularly compelling when you layer in Orla’s existing infrastructure at Camino Rojo. The oxide heap leach operation is already permitted, constructed, and operating. Shared crushing, grinding, and metallurgical facilities reduce incremental capital for the underground component. More importantly, they compress permitting timelines: a variable that’s killed more projects than technical failure.
The De-Risking Timeline
Orla’s 2026 program isn’t purely exploratory. It’s designed to methodically retire technical risk before committing construction capital.
The drilling is targeting three specific objectives: confirming grade continuity at depth, defining geotechnical parameters for mining method selection, and validating metallurgical assumptions through bulk sampling. Each of those reduces project risk by narrowing the range of potential outcomes.
Grade continuity determines whether the resource estimate holds at depth or if dilution from waste rock intrusions compromises economics. Early results suggest continuity is solid: drill intercepts are matching or exceeding modeled grades.
Geotechnical data drives mining method decisions. Sublevel stoping, longhole stoping, and cut-and-fill each have different cost structures and recovery profiles. Getting this wrong means either leaving ore in the ground or mining at costs that destroy returns. Orla’s investing in characterization now to avoid expensive method changes mid-development.
Metallurgy is where underground projects typically face surprises. Oxide heap leach metallurgy is forgiving: crush it, stack it, irrigate it with cyanide solution, and gold reports to solution. Underground sulfide material requires flotation or roasting, both of which are sensitive to mineralogy changes.
The selective flotation circuit design at Camino Rojo targets three concentrates because the ore body contains economically meaningful base metal credits alongside gold. Recovery optimization across multiple mineral phases is metallurgically complex. The de-risking program includes pilot plant work and locked-cycle testing to validate that the flowsheet actually works at the grades and mineralogies present in the deposit.
This isn’t academic. Poor metallurgical design has torpedoed projects with better economics than Camino Rojo Underground. Orla’s burning time and capital in 2026 to avoid building the wrong plant.
What This Means for the Sector
The Camino Rojo Underground PEA represents a broader trend that’s reshaping gold project economics: major producers are exhausting their high-grade oxide resources and confronting the reality that future growth requires underground mining and sulfide processing.
That transition is expensive and technically difficult, which is why many companies are deferring it. Orla’s getting ahead of it.
The company’s portfolio already includes Musselwhite, where they’re demonstrating underground exploration success. The Camino Rojo PEA shows they can replicate that model in different jurisdictions and geological settings. For investors evaluating mid-tier gold producers, that operational optionality matters.
The $1.3 billion NPV and 30% IRR aren’t just project metrics: they’re proof points that selective underground mining can compete economically with bulk open pit operations, especially in a rising gold price environment. The leverage to gold prices above $3,000 per ounce creates asymmetric upside that open pit expansions simply can’t match.
The de-risking program through 2026 addresses the execution risk that typically plagues underground transitions. Rather than hoping for the best, Orla’s systematically validating the technical assumptions that drive the economic model. That’s capital discipline that’s rare in a sector known for overbuilding and underdelivering.
The broader mining industry is watching similar transitions at assets globally. Barrick’s aging oxide deposits. Newmont’s declining reserve grades. Even the majors are confronting the same reality: easy tonnage is gone, and the next phase requires underground skills and infrastructure.
Orla’s building both. The Camino Rojo Underground PEA demonstrates that mid-tier producers can execute this transition profitably if they sequence capital intelligently and leverage existing infrastructure. The 2026 de-risking work will determine whether the PEA economics translate to construction decisions, but the blueprint is already clear.
High-grade underground. Selective processing. Phased capital deployment. Leverage to rising gold prices.
That’s the operating model that delivers 30% returns when everyone else is chasing 15%. The companies that figure that out early won’t just extend mine life: they’ll redefine what high-margin gold production looks like in the 2030s.
