Gold futures have broken out to a string of new record highs in recent sessions. Gold for February delivery (GCG24) is trading down in today's session, but earlier the contract tagged a new record peak north of $2,100 an ounce, continuing a short-term rally propelled by weakness in the U.S. dollar and expectations for a more accommodative Fed.
As gold futures solidify their newfound breakout above the psychologically significant $2,000 level, some of Wall Street's favorite gold-focused assets are also taking flight. The SPDR Gold Shares (GLD) exchange-traded fund (ETF) has gained more than 9% since the start of October, while the VanEck Gold Miners ETF (GDX) is more than 14% higher over the same time frame.
However, not all stocks in the precious metals space are rising with the tide of gold prices. While GLD and GDX are now on positive ground after a choppy 2023 performance, some gold stocks are still firmly in the red. Here's a look at one of these underperforming gold names to see whether it's a value buy at current levels.
About Orla Mining
Founded in 2007, Vancouver-based Orla Mining (ORLA) is a gold and silver exploration and development company. Its core business revolves around exploring for and developing gold and silver deposits, and its flagship asset is the Camino Rojo Project. The company's market cap currently stands at $968.4 million.
Orla Mining stock has had a rough ride in 2023 so far, declining 25.5%. And since the start of October alone, while gold and gold-based assets have rallied, ORLA has tumbled 15%.
Orla Misses on Q3 EPS
In its latest quarterly results, reported in mid-November, ORLA fell short of Wall Street's earnings estimates. Adjusted earnings arrived at $6.6 million, or $0.02 per share - missing the consensus forecast of $0.05 by a wide margin.
Elsewhere in the report, cash flow from operating activities grew by 8.6% from the previous year to $21.8 million, on an adjusted basis. At the end of September, net debt was $3.4 million, compared to a cash balance of $132.8 million. Additionally, ORLA amended its $150 million credit facility to secure more favorable lending terms.
Plus, the company raised its gold production guidance for the full year to a range between 110,000 and 120,000 ounces, up from 100,000 to 110,000 ounces initially, reflecting ORLA's operational strength.
Wall Street expects EPS to rebound for Orla in the next fiscal year. Following an anticipated 28% EPS decline in fiscal 2023, the consensus is calling for a bottom-line improvement of 33% in fiscal 2024.
More North American Production Coming Online
Orla is currently a single-asset producer, with the Camino Rojo Oxide Gold Project in Mexico as its only asset. However, that is expected to change soon with the company's South Railroad project in Nevada on track to obtain the required permits by Q2 2025. This is expected to result in the commencement of production in 2026.
With the South Railroad project, Orla's peak production can reach roughly 300,000 ounces of gold in 2027 (~100,000 ounces Camino Rojo, ~190,000 ounces of peak production at South Railroad) and an average production of about 250,000 ounces.
What Do Analysts Expect for ORLA?
Analysts remain cautiously optimistic about Orla Mining stock, which has an average rating of “Moderate Buy” with a mean target price of $4.70. This denotes an upside potential of about 56% from current levels.
Out of five analysts covering the stock, three have a “Strong Buy” rating, one has a “Moderate Buy” rating, and one has a “Hold” rating.
