A low-cost gold producer with high-grade Mexican assets, exponential revenue growth, and deep value metrics in a rising gold price environment
Prem Watsa
Fairfax Financial Holdings
Est. ~3.0% of total portfolio
“Prem Watsa: 'We have always believed in maintaining a hedge against financial calamity. Gold miners provide that hedge with the added benefit of operating leverage to gold prices.'”
The Business
- Orla Mining is a gold producer operating the Camino Rojo oxide mine in Zacatecas, Mexico, producing gold through heap leach processing
- The company also owns the South Railroad gold project in Nevada's Carlin Trend, which is in the permitting/development stage
- FY2024 net income was $89M with FY2025 TTM revenue of $772M, reflecting rapid production growth
- Orla trades on both the NYSE (ORLA) and TSX, with operations focused on low-cost, politically stable jurisdictions
Why They Own It
“Prem Watsa: 'We have always believed in maintaining a hedge against financial calamity. Gold miners provide that hedge with the added benefit of operating leverage to gold prices.'”
- Orla operates the Camino Rojo mine in Mexico — a low-cost, high-margin gold operation in a well-understood geological setting
- Revenue has grown 146% YoY as production ramps, with TTM revenue of $772M and rapidly improving profitability
- Free cash flow of $646M reflects extraordinary cash generation at current gold prices, with an 84% FCF margin
- Watsa's contrarian approach: gold miners are deeply out of favor with growth investors, creating deep value opportunities
- The South Railroad project in Nevada provides a second mine with significant production growth potential
What the investor sees
Orla trades at roughly $6/share with a market cap of approximately $1.3B. At current gold prices ($2,000+/oz), the company generates enormous free cash flow relative to its market cap. Watsa's thesis is that the stock is priced for historical production levels rather than the current production run rate, and the South Railroad development project represents significant upside not reflected in the share price.
Financial Snapshot
$772M
revenue ttm
$89M
net income FY2024
~$1.3B
market cap
$646M
free cash flow
146% YoY
revenue growth
84%
fcf margin
Camino Rojo, Mexico
primary mine
South Railroad, Nevada
development project
The Moat
- Low-cost production — Camino Rojo's all-in sustaining costs are among the lowest in the Americas, providing margin protection at lower gold prices
- High-grade ore body — the Camino Rojo deposit has favorable metallurgy and grade, enabling efficient heap leach processing
- Jurisdictional advantage — operating in Mexico with a well-understood regulatory environment and existing mining infrastructure
- Growth optionality — South Railroad project in Nevada's prolific Carlin Trend provides a clear path to production doubling
What Could Go Wrong
Gold price sensitivity — revenue and profitability are heavily dependent on gold prices, which can be volatile
Single-mine concentration — the majority of current revenue comes from one mine (Camino Rojo), creating operational concentration risk
Mexican political and regulatory risk — changes in mining taxes, regulations, or political stability could impact operations
Development execution risk — South Railroad project requires significant capex and regulatory approvals to reach production
Currency risk — operating costs in Mexican pesos but revenue in US dollars creates FX exposure
Catalysts
- Continued production ramp at Camino Rojo driving revenue and cash flow growth
- South Railroad project advancement through permitting and into construction
- Rising gold prices — gold above $2,000/oz creates extraordinary margins for low-cost producers
- Potential M&A — Orla could be an acquisition target for larger gold miners seeking low-cost production growth
- Dividend initiation as free cash flow generation matures
In Their Own Words
“Prem Watsa: 'We look for deep value — situations where the market is pricing in the worst case and ignoring the base case. Orla is a perfect example of this.'”
“Prem Watsa: 'At Fairfax, we are willing to be contrarian and patient. We buy when others are fearful and hold until value is recognized.'”