Presenting is Etienne Morin, the CFO. Thank you, Etienne.
Thank you, Tony. Good afternoon. I guess it's still morning. Good morning, everybody. Thanks for being here. I think you're going to hear a lot of similarities to the previous two speakers in my presentation today. It's the third company in a row that's benefited from acquiring an asset from Newmont, an asset that was probably starved for capital and a little TLC. I'm referring to our Musselwhite acquisition. We'll get to that in a minute. Skip over. Jumping right into it, at Orla, we follow a pretty simple three-pronged model for value creation. We execute on a proven strategy, which is focused on really developing low capital intensity and low complexity projects that have also larger scale opportunities. You'll see that in some of our assets in a minute.
When we started Orla, we wanted to really try to replicate the model that Glamis Gold had followed, for some of you who remember Glamis, who operated in the 1990s and early 2000. That's sort of the model we were trying to follow as well. We also want a portfolio of quality assets in proven camps with sizable land package where we can explore and extend mine lives, and find new discoveries, and I'll talk about the assets, obviously, in a minute. Finally, we team up with industry leaders. Until late last year, we had both Agnico Eagle and Newmont as key shareholders of Orla. They both own roughly 10%, and they both sold out in Q4 of last year. Both Agnico and Newmont provided tremendous technical and financial support during the first eight years of our existence at Orla.
We're very grateful for that support. We also have the industry veteran, Pierre Lassonde, as one of our key shareholders still. Pierre is also one of the founders of Orla, and he continues to provide support for our team. For those less familiar with our portfolio, we have three key assets, including two producing mines. We have the Camino Rojo mine located in Zacatecas, Mexico, and the Musselwhite mine located in northern Ontario in Canada. Camino Rojo is a low-cost, open-pit heap leach mine, which began commercial production in 2022 and has close to 5 million ounces in resource. The Musselwhite mine is our newest addition. Musselwhite was acquired from Newmont for $850 million in Q1 of last year. It's an underground mine that's been operating for over 28 years and has produced over 6 million ounces and counting.
Our third asset is the South Railroad project, that's located in the heart of the Carlin Trend near Elko, Nevada. South Railroad is also an open- pit heap leach mine. It has a lot of similarities to our Camino Rojo project or mine, and we're currently awaiting a final Record of Decision, which should occur later this year in the late summer, before we can begin construction activities. Earlier this year, we released an updated feasibility study for South Railroad, which is now kind of our blueprint for the construction. Once built, South Railroad will add about 130,000 ounces of annual gold production to our portfolio. With the addition of Musselwhite last year and South Railroad in roughly 18 months, we're inching closer to about 500,00 ounces per year of gold production at incredible margins in the current gold price environment.
We also have other growth opportunities within the portfolio, which allows us to continue to improve the business over time in the coming years as well. In January, we did release the results of a PEA on the Camino Rojo underground project. It is an extension of the current open- pit oxide mine and will produce an average of 230,000 ounces per year when built. We already have a team down in Mexico. We have infrastructure, and the project would extend the Camino Rojo mine for another 15 years. Focusing on value creation, this is showing our share price performance since Orla's inception. Our growth in value has been on the back of a strong execution, and the Musselwhite acquisition was also a very transformative acquisition for us. The timing of the gold rally could not have been any better.
We went from being a single asset company to almost tripling our annual production and also diversifying our portfolio, and the market reacted very well to the acquisition. In talking about the gold rally, while margins across the industry have increased significantly over the last two years, and although we've seen some general cost increases, those increases have been modest for the most part. As a result, we, Orla, and many others in the space, I think, have been generating significant cash flow during that time period. 2025 was a transformative year for us. We closed the Musselwhite transaction at the end of February last year and spent most of the year integrating the asset into our portfolio. We produced just over 300,000 ounces last year, of which about 200,000 was attributable to Musselwhite.
All-in sustaining costs came in around $1,450 per ounce, right in the middle of our guidance range of $1,350-$1,550. When comparing this to the average gold price of last year, of 2025, which was just over $3,400, it seems a long time ago that we were in a $3,400 range, but that was roughly the average for 2025. That's about a $2,000 margin per ounce, and that resulted in roughly $400 million in free cash flow in 2025 for Orla. 2026 is a catalyst-rich year for Orla. First, as I mentioned earlier, we already delivered a ready-to-build updated feasibility study for South Railroad. Second, we delivered our initial Camino Underground PEA outlining really the future of Camino Rojo. Also in Mexico, we received our long-awaited permits to expand the oxide open- pit, and that adds another five years of mine life to the asset.
With that permit, it allows us to start the construction of an underground decline to get in the heart of the phase II of the Camino Rojo mine, which is the underground project. Lastly, as we speak, we're in full procurement at South Railroad. We expect to begin construction in August of this year. We've accomplished a lot. Again, with the procurement process, we're just trying to get ahead and not delay the timelines while we wait for the final permits. We've accomplished a lot so far already this year, but now the focus will turn to the execution on the construction of South Railroad in the second half of this year. For 2026, our guidance this year, it's gold production between 340,000 and 360,000 ounces and an all-in sustaining cost between $1,550 and $1,750.
When we look at the individual assets, Camino Rojo remains a very low-cost operation. In Musselwhite, we're starting to see the benefits of the capital investments that we did last year and again this year with production increasing year-over-year. This year we continue to invest, we continue to recapitalize the mine that was starved for capital when we acquired it. We're pushing a lot of underground development and purchasing many new yellow trucks to improve the efficiency in the mine as well. At $4,500 gold, margins do continue to expand versus 2025, and we expect to generate $650 million in cash flow before reinvesting roughly $450 of that into the business, half of that to build our next mine in Nevada. In 2026, we're committing to that $450 million to advance our growth projects.
At Musselwhite, we'll continue to replace the mobile fleet, the mobile underground fleet, and push as much development as we can to get ahead and create more flexibility for the mine. We're also committing $30 million in exploration at Musselwhite alone to test the thesis that the deposit continues well beyond the known reserves. At Camino Rojo, we're expanding the leach pad this year, which is a big part of the $40 million that you see here on this slide. We also continue to drill the sulfides to expand and better define the current sulfide resource and ultimately convert those resources into reserves. Lastly, at South Railroad or South Carlin, you see here on the slide, we're starting construction in August. We're already spending and placing equipment orders ahead of time to ensure that we keep the development timelines, as I mentioned.
The planned spending this year represents roughly half of the total capital of the project, which is around $400 million. With the successful year that we had in 2025, it's allowed us to focus on strengthening the balance sheet. Musselwhite was purchased without issuing a single share up front. At the closing of the transaction, we had a significant amount of debt on the balance sheet, and throughout the year, we took a very disciplined approach to repay close to $280 million in debt in the first 12 months post-acquisition. We exited 2025 with just over $420 million of cash and $385 in debt, making us net cash positive at the end of last year. Just briefly on the three assets.
Musselwhite performed better than expected through 2025, function of sustained higher gold prices, allowing more flexibility with stope sequencing and also with the cut-off grades. Seeing the benefit of some capital investments that we did early in the year, as I mentioned, I go back to additional underground development and turning over the mining fleet have created some benefit and increased throughput. We expect production this year to be in the range of 230,000 ounces -240,000 ounces. The focus this year is really to continue to prove that thesis that the mine trend really continues well beyond the current known reserves. Between 2025 and 2026, we're spending over $50 million in exploration at Musselwhite alone, and that's not a small amount for a company our size.
Again, it's really to prove that thesis that beyond the known reserves, there's a lot more and that deposit really continues. The mine has been operating, as I said earlier, for 28 years, and currently extends over 6 km in length. Over that 6 km length, it's produced 6 million ounces during its life of mine. We've now demonstrated that we can extend that trend by 2 km through the drilling that we've done over the last year. If you do quick math, you can come up with a pretty good estimate of how many ounces we think we can add in the short term. Current reserves at Musselwhite is 1.5 million, roughly six years of mine life.
One of the stories that I like to tell about Musselwhite to really demonstrate the geological potential of that mine is when I was hired at Goldcorp back in 2006 as a young analyst, Goldcorp had just purchased the Canadian assets of Placer Dome, and Musselwhite was part of that package. Musselwhite had 1.5 million ounces in reserves at the time in six years of mine life. Now fast-forward to today, 20 years later, almost to the day, and a few more gray hair, Musselwhite still has 1.5 million ounces in reserves and six years of mine life. I bet if I stand here in 10 years, Musselwhite probably is going to have 1.5 million ounces in reserves in six years of mine life.
That's the kind of upside and geological potential, and that's why we were so excited about this asset when we acquired it. At South Carlin, as mentioned earlier, South Railroad is our next phase of growth. The feasibility defined a 10-year project with annual production of 130,000 ounces a year for the first five years, and an all-in sustaining cost just below $1,500 an ounce. We're currently in the final stretch of project permitting, and we've already started, as I mentioned earlier, procurement, with a focus on civil works and longer lead time equipment such as gensets, shovels, and scoops, and the mining fleet in general. Construction will span over 18 months, and assuming that we are starting construction as planned in August, we'll have first production in first quarter of 2028.
The estimated capital cost for the project is just under $400 million, which will be funded through our cash on hand and future cash flow over the next couple of years. Really, the most exciting aspect of South Railroad is the district potential. The project is located right in the heart of the Carlin Trend in Nevada, one of the most prolific gold camp in the world. We're spending roughly $15 million this year in exploration to continue to test the many targets that we've identified since taking over the project from Gold Standard Ventures in 2022. We've already identified additional mineralization around the two pits, and we'll provide an updated resource estimate once the permits have been received. We don't want to upset any of the permitting by releasing new reserves and resource before we get the final permit.
Many of the targets that you see here, I understand it's a bit small here, but many of the targets that you see have identified both oxide and sulfide mineralization. We expect to be in a position to add many more ounces at this project over time. Lastly, at Camino Rojo, now that we've received the final permits for the expansion of the open pit, we'll be in a position to mine the full extent of that deposit over the next five years at a steady state of around 115,000 ounces per year. Camino Rojo remains a very low cost, high margin operation. The next phase after the open pit is to get underground and continue mining the extension of that deposit. There's more than 4 million ounces of sulfides sitting right below the oxide open- pit.
As I mentioned earlier this year, we released our initial study on the underground project, and that highlighted a project that can produce 230,000 ounces a year over about a 15-year mine life. This is a 30% rate of return project at $3,100 gold. At $5,000 gold, it's over 60% internal rate of return. It's a robust project, and we'll be starting a decline later this year to get underground, continue exploration, drilling, try to get tighter spacing, and with the objective of converting resources into reserve ahead of a construction decision. As we get underground, we'll continue testing the extension of Zone 22, which you see at the bottom left of that graph.
Over time, we'll incorporate the results of the drilling of Zone 22 into a pre-feasibility study that we're doing this year, with the target completion around the middle of next year. Lastly, we get a lot of question around capital allocation. Of course, with the current gold price environment, we're constantly reviewing that framework to ensure that we have a balanced approach, and focused on really four key priorities. One is that to fund the expansion of resources and new discoveries through exploration. The second one is make sure we reinvest in the business, the construction of South Railroad, make sure we continue fueling our growth. Musselwhite also has a lot of exciting projects that could take this mine to the next level. The third one is make sure we continue to deliver, get to a comfortable leverage ratio.
I think we've done a good job of that over the last year, but we'll continue to do that. And last but not least, we started in December of last year with announcement.
Just about run out of time. Any questions? Thank you. Any quick questions from the floor, please? There is time for one brief question. I'll ask then a question. You talked about capital allocation. Obviously, big CapEx this year for $50 million-plus exploration. You still have about $380 million of debt, so I presume you'll leave the debt there. In 2027, you'll be cash harvesting phase. Would you then even further review your capital return policy because you'll have an embarrassment of riches in terms of cash flow and cash, I suspect?
Yeah. We're constantly reviewing that capital allocation framework. We're in conversation. We're getting a lot of questions about share buybacks, and a lot of our peers have put it in place. We have the dividend now. The priority is to reinvest into the growth into the business. Once we get past the construction of South Railroad, we're likely going to have the construction of the underground at Camino Rojo. That's going to generate, or use a lot of our cash. We'll continue balancing the right amount of debt, but with reinvesting into our projects as well.
Great. Please join with me thanking Etienne for that presentation. Thank you.