OceanaGold Corporation (OTCPK:OCANF) Q2 2020 Earnings Conference Call July 30, 2020 5:30 PM ET

Company Participants

Sam Pazuki – Vice President-Investor Relations

Michael Holmes – President and Chief Executive Officer

Scott McQueen – Chief Financial Officer

Jim Whittaker – Executive General Manager-Haile operation

Conference Call Participants

Levi Spry – JPMorgan


Good day, ladies and gentlemen, and welcome to the OceanaGold Second Quarter 2020 Financial and Operating Results Conference Call and Webcast. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Note that this call is being recorded Thursday July 30, 2020.

And I would like to turn the conference over to Sam Pazuki. Please go ahead.

Sam Pazuki

Good evening. Good morning. Welcome to OceanaGold’s second quarter 2020 results webcast and conference call. I am Sam Pazuki, the Vice President of Investor Relations for OceanaGold. I’m joined today by Michael Holmes, President and CEO of OceanaGold; along with Scott McQueen, Chief Financial Officer; Mark Cadzow, Chief Development Officer; and Jim Whittaker, Executive General Manager of the Haile operation.

Before we proceed, note that the references in this presentation adhere to international financial reporting standards, and all financial figures are denominated in U.S. dollars, unless otherwise stated. Also note that the presentation contains forward-looking statements, which, by their very nature, are subject to some degree of uncertainty. There can be no assurances that our forward-looking statements will prove to be accurate as future results and events could differ materially.

Note also that we are providing the current status of our operations and our business and announced earlier revision to our 2020 guidance related to COVID-19 impacts on the Macraes operation. Despite already flagging this change, it’s important to point out that the current situation related to the COVID-19 virus remains fluid and may still have further impacts.

In this presentation, we will also discuss again the results of the Waihi District Study preliminary economic assessment. According to the definition of a PEA, it is not intended to demonstrate viability, but rather study the potential viability of the Waihi District. The PEA includes the inferred mineral resources that are considered too geologically speculative to have economic considerations applied to them in order to be categorized as mineral reserves. Further drilling, evaluation and studies are required to provide any assurance of economic development case. I refer you to the disclaimers on the forward-looking statements in our presentation.

I will now turn the presentation over to Michael Holmes.

Michael Holmes

Thank you, Sam, and good morning, good evening to all. I hope everybody is staying healthy during this continued unprecedented time, and thanks for joining us today. Moving on to Slide 3. The second quarter was always expected to be our weakest quarter for production, but the results also demonstrate the impact the global pandemic has had on our business. Although we originally believe we could maintain our original guidance range, we have come to realize that the 5-week hiatus at Macraes had more of an impact in the context of the full year outlook than initially expected.

Our revised 2020 outlook reflects the direct impact on the second quarter production at Macraes as well as the flow-on timing impacts to the mine grades in the fourth quarter. As a result, we now expect consolidated gold production to range between 340,000 and 360,000 ounces, down from 360,000 to 380,000 ounces, albeit at an improved all-in sustaining cost ranging between $1,050 and $1,100 per ounce sold, down from $1,075 to $1,125 per ounce sold.

At Martha Underground, we developed nearly 1.5 kilometers, which was higher than what we expected given the COVID lockdown. Approximately 2,900 meters of underground development have been completed year-to-date. At Haile, we are maintaining our full year production guidance range of 180,000 to 190,000 ounces while reducing our site all-in sustaining cost range to 10 – to $1,020 to $1,070 per ounce sold on the back of the lower forecasted sustaining capital spend.

Power production and costs in the second quarter were broadly in line with expectations. And despite record May rainfall, combined with the ongoing management of the COVID-19 protocols, productivity improvements continued with higher plant throughput, increased material mined and lower unit costs. We do however, note the continued trajectory of the COVID-19 in the U.S. and South Carolina remains highly uncertain and poses ongoing risks.

At a total company level, revenue and EBITDA decreased from the previous quarter due to lower gold sales volumes. The key change has been the completion of the main stoping at the Correnso ore body at Waihi in the first quarter. No quarter – no second quarter gold sales from Didipio and lower-than-expected production from Macraes where COVID had a material impact.

Our adjusted net loss of $42 million year-to-date and $31 million in the second quarter reflects the lower sales volume and revenue. Our second quarter adjusted EPS result was negative $0.05. And while a weaker financial performance was expected, the quarter was further impacted by the COVID restrictions at Macraes, along with noncash financial adjustments, including losses on currency translation and a higher tax expense.

Cash flow per share was $0.09 year-to-date, excluding the first quarter gold presales and $0.02 in the second quarter, which was broadly in line with analyst consensus. We continue to advance our exciting organic growth opportunities. We delivered a robust Waihi District preliminary economic assessment a couple of weeks ago. We continue to advance development of a fully permitted Martha Underground, where we’re on track for first production in the second quarter of 2021. We continue to advance the other Waihi District opportunities, including WKP through the permitting process. At Macraes, the Golden Point underground study remains on track for completion in the third quarter.

Turning to Slide 4. Safeguarding the health and well-being of our workforce remains a top priority for us, and we have very strict protocols in place across the business. With the rapid escalation and spread of COVID-19 virus at the beginning of the second quarter, we acted quickly to safeguard our workforce, implementing very strict protocols at each of our operations and for our corporate staff, including workplace health screenings, staggered shifts and rigorous cleaning practices.

The Haile operation has had 8 positive COVID-19 cases, of which 3 cases remain active and under quarantine. Due to our COVID-19 protocols at Haile, the 171 workers have had to self-isolate for 2 weeks at some point since the beginning of March. The New Zealand government’s lockdown curtailed operations at Macraes and halted capital alone at Martha Underground at Waihi for 5 weeks.

To date, we’ve had no confirmed cases of COVID-19 at either site. There are currently no restrictions in place across the country other than the borders remain closed to foreigners. Didipio remains in the state of operational readiness. There are no confirmed cases of COVID-19 at site to date, and we are operating under the general community quarantine requirements. Despite all these challenges, our safety performance continues to improve, resulting in the company’s total recordable injury frequency rate trending lower to 2.7 per million hours worked. This is a fantastic effort and a near record for the company.

Moving on to Slide 5. We have operated a sustainable business for the past 30 years by applying robust ESG practices across our business. And in June, we launched our 2019 sustainability report that captures our commitment to responsible mining and is based on the globally recognized Global Reporting Initiative framework. In 2019, under our new integrated management system, we made significant progress in a few areas, including the review of our responsible mining policies, the launch of a new policy around our engagement with government and federal society and the issuance of 9 statements of position focused on social and environmental aspects.

We are extremely proud of our ability to discover ore bodies, build projects, operate mines and rehabilitate depleted mines. Our overall ESG performance has been recognized again by the major ESG rating agencies. And most recently, we maintained our A rating with MSCI, putting us among the lead ESG performers in the mining industry.

Moving on to Haile and on to Slide 7. Haile delivered continued improvements, even despite the challenging conditions that I previously mentioned. In my 30 years in the mining industry, I’ve come to understand that mining carries many risks, technical, social and economic. Layering on a global pandemic has added even more complexity. With that said, I am pleased to see the Haile operation’s continued safety performance improvement with the total recordable injury frequency rate significantly lower at 2.7 from 7.7 per million hours worked a year ago. I attribute this to the strong leadership we put in place at the operation, and Jim and his team have been filled a strong safety culture with continuous employee engagement.

Despite these challenges, where a meaningful proportion of our workforce have been off-boarded due to COVID-19 protocols and the record rainfall in May, Haile has managed through this and delivered significant operational improvements. Total second quarter mining movements have nearly doubled year-on-year and increased 18% from last quarter, reflecting the ongoing improvement in mining productivities. The excessive rain did impact our ability to access high-grade areas of the open pits, which we now expect to mine this quarter.

Ore mining during the second quarter increased from the first quarter and the prior year, with activities focused on ore mining at Red Hill and the pre-stripping of waste in the Snake Phase 2 and Ledbetter Phase 1 pits. Higher mill throughputs in the quarter helped to deliver significant increase in production quarter-on-quarter. This was partially offset by moderately lower grades. We maintain gold recoveries despite the slight reduction in head grade, which reflects the continuous improvements to the fine grinding circuit.

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Mining unit costs decreased 22% from the previous quarter and 43% over the prior year period. Processing unit costs per tonne decreased 14% from the prior quarter and 17% from the previous year. The reduction in unit cost reflects the increased mining productivity and process plant improvements and enhancements. We have maintained Haile’s gold production range, and we continue to expect a strong second half of the year, particularly in the fourth quarter. As a reminder, the second half of the year is expected to deliver 2/3 of Haile’s annual gold production at the corresponding lower all-in sustaining cost. In this second half, we will focus on increasing mining rates, and we’ll commission an additional 4 Komatsu 730E large haul trucks to support the mining operations.

Although we expect to see the lower sustaining capital costs, this is offset by higher growth capital spend, which is associated with progressing an additional lift on the tailings storage facility and additional waste rock stacks to support the expanded mining operations. The original lift of the TSF is nearly complete. And with the contractor on site, we are bringing forward the next phase of the lift from 2021 to this year. This will further support the expanded mining operations while managing the water balance on site.

Turning to Slide 8. We recognize that weather has been a consistent theme for us at Haile. The reality is that the Carolinas continue to experience record excessive rainfall. And although we have factored in rain when setting our budgets and guidance, it is a variable that we cannot predict, and it does and will remain a factor of our operations until we have opened up more pits and mined down to hard rock. I draw your attention to the slide where we are highlighting the enhancements we have made to the Haile operation, which has yielded continuous improvements to productivities and costs.

In the month of May, the site recorded 12.5 inches of rainfall, which is significantly more than the period between September and December of 2018. Despite this rainfall in May, we mined as much material for the month as we did mine for the fourth quarter for the whole quarter of 2018 at a mining cost of nearly half. This is a testament to how well we had adapted to mining in the heavy rain periods and changes we have made to mitigate the risks of weather.

Turning to Slide 9 and Macraes. And during the first quarter, Macraes operation reported 1 recordable entry. It’s the first of the year resulted in a total recordable injury frequency rate of 1.5 per million hours worked. The operations continues to see a significant reduction in the number and severity of injuries as compared to last year. And again, I applaud the concerted effort by Matt Hine, our site General Manager, and his team on the ground for establishing a strong safety culture.

In the second quarter, Macraes produced approximately 28,000 ounces of gold. While lower production was expected, the performance was further impacted by the COVID-19 restrictions. Over the 5-week lockdown, we were required to curtail operations to meet regulatory requirements, including the suspension of mining operations. Mine operations were limited to hazard management activities exclusively, and the processing plant was restricted to the minimum throughput capacity required to maintain the autoclave.

Despite mining a near record 5.2 million tons in May, followed by the 4.5 million tons in June, the 5 weeks of cessation in mining has adversely impacted our outlook for the year for Macraes. The 5-week loss of mining will delay access to the higher-grade ore from the Coronation North Phase 4, which we were expecting would be the principal feed in the fourth quarter. This material will now be mined in the first half of 2021.

Additionally, the suspension of mining activities required us to feed upside materials from stockpiles, which we could not effectively sample, resulting in significantly lower-than-expected gold recoveries. These challenges have culminated in the reduction in the expected gold production for the year and the result of higher all-in sustaining costs. We do continue to expect the fourth quarter to be our highest quarter of production at the lowest corresponding all-in sustaining cost.

Moving on to Slide 10 and Waihi. Waihi reported 1 recordable injury during the quarter, increasing its total recordable injury frequency rate to 5.3 from 4.2 per million hours worked at the end of the first quarter. The development of Martha Underground was temporarily curtailed due to the COVID-19-related restrictions, which were lifted on the 27th of April. At the end of the quarter, we completed 1,342 meters of development, which was ahead of our expectations.

As the year progresses, we expect development rates to continue to increase as shown on the chart. And despite the 5-week COVID-19 lockdown, we remain on track for first production from Macraes Underground in the second quarter of 2021. Looking ahead, we expect to process ore from the narrow vein mining in the upper Correnso to produce approximately 8,000 ounces of gold production in the fourth quarter of this year.

Moving on to Slide 11 in Didipio. Our focus in Didipio is the lifting of the operational restraint of the mine and renewing the FTAA. We remain in dialogue with the appropriate government representatives at the national level. And during the second quarter, all levels of government in the Philippines were responding to the COVID-19 pandemic.

Following the meeting with the President at the end of February, a government working team was established to renew the – to review the FTAA renewal. This team commenced their work in March before temporarily pausing to focus on the COVID crisis. The government FTAA working team reengaged on the renewal process. And following the completion of that work, they re-endorsed the FTAA renewal to the Office of the President at the end of the quarter. Currently, our understanding is the FTAA renewal remains with the Office of the President for approval.

Since the operations were restrained in July 2019, our objective has been to maintain as many of the operational workforces for as long as possible to quickly and safely resume operations. Following nearly 12 months of restraints, we made the difficult decision to begin the progressive temporary layoff process in mid-April. To date, approximately 500 of the 750 direct workforce have been temporarily laid off. Under the Labor Code of the Philippines, the company can temporarily lay off employees for no longer than 6 months.

At the end of that period, the company will either commence the process of termination or renewal of employment. Decision to terminate or renew, which must occur in mid-October of this year, will be dependent on the lifting of restraints or the renewal of the FTAA. We’re also engaged in open dialogue with local government units to address the continued blockade of the access road by the antimining activists. Didipio is a significant source of jobs, taxes and revenues that we believe will be crucial in contributing to the Philippines post 2019 recovery.

I will now turn the presentation over to Scott McQueen to take you through our financial results. Thank you, Scott.

Scott McQueen

Thank you, Michael, and hello, everyone. The next few slides cover our second quarter financial results and balance sheet.

Turning to Slide 13, which includes a snapshot of the balance sheet. As shown on the slide, as at 30 June, our cash balance was $148 million, and our net debt stood at $170 million. We have been actively managing our cash and liquidity position for some time in response to the ongoing Didipio suspension, includes steps already taken in the first quarter to better align our 2020 operating cash flow profile with our capital investment plans. These steps included the sale of our strategic equity interest in Gold Standard Ventures, the export of the doré inventory from Didipio, the gold prepay arrangements executed in the first quarter and the drawdown of the final $50 million available on our revolving credit facility. The timing of these steps in part reflected our expectation of weaker performance through the first half, given, as Michael just pointed out, 2/3 of our 2020 production is expected in the second half of the year.

However, the five weeks New Zealand COVID-19 restrictions, which impacted Macraes, in particular, made the second quarter even more challenging. However, with Macraes back to full operation, and as we progress through the balance of the year, we expect to see our performance improve as mined grades increase at both Haile and Macraes with the fourth quarter remaining the strongest quarter of the year.

Given the continued suspension of operations at Didipio, we have and will continue to proactively manage the balance sheet to meet the short-term challenges we face while ensuring adequate funding capacity to deliver the company’s high-value growth projects on the optimal time lines. Given the record gold prices and strong future margins they represent, I would also add that we don’t have any current plans to undertake further hedging.

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Moving on to Slide 14 and the financial results summary. Quarter-on-quarter reduction in both revenue and EBITDA aligned with the lower gold production and sales. As already noted, the results included lower-than-expected second quarter production at Macraes, given the COVID-19 restrictions. Other key second quarter changes included no sales from Didipio, whereas the first quarter included the sale of the doré inventory, plus the idling of processing at Waihi, with main stoping at Correnso completed in the first quarter. Waihi is, of course, scheduled to run a campaign in the fourth quarter to process narrow vein ore, which is currently being mined and stockpiled.

The overall second quarter result was a net loss of $31 million, which included an unrealized after-tax gain of just under $7 million on the fair value of the remaining New Zealand dollar gold hedges. Approximately 59,000 ounces remain on those hedge contracts in the second half.

On an adjusted basis, after excluding noncash unrealized gains and losses on hedging and asset write-downs, revenue, as a result, though, it was largely unchanged, had a loss of $32 million or negative $0.05 per share.


Please standby while we reconnect Mr. McQueen. Please go ahead, Mr. McQueen.

Scott McQueen

Hello, everyone. Sorry. It appears that the line got a cut-off and not been taking the lockdown here in Victoria pretty seriously. I think I was just referring to the negative $0.05 per share fully diluted EPS, which took the first half results to an adjusted negative $0.07 per share fully diluted.

As noted earlier, the second quarter result was impacted by the COVID restrictions in New Zealand. Also, as Michael mentioned, the second quarter included several material noncash adjustments amounting to nearly $0.01 on EPS, including unrealized movements related to currency conversions and related tax provisions. These currency impact is related to a material appreciation of both the New Zealand and the Australian dollar exchange rates across the quarter.

It’s also worth noting that we are not currently recognizing any potential income tax credits associated with the costs incurred in the Philippines. We maintained Didipio in a state of operational reviews. As far as the cash flow summary at the bottom of the slide, operating cash flow for the quarter decreased to $17 million as compared to $121 million in the first quarter, which included approximately $79 million related to the gold prepay. On an adjusted basis, after removing working capital changes, the operating cash flow per share for the second quarter was $0.02 fully diluted and $0.09 on a year-to-date basis.

Noting that the prior quarter investing cash flow has included $22.7 million credit for proceeds on the sale of our equity interest, the second quarter actually shows a slight reduction in CapEx. This reduction primarily reflects lower pre-stripping, given the COVID restrictions suspended nearly five weeks in Macraes as well as lower general operating capital.

Financing cash flow of approximately $4 million reflects the net proceeds received from refinancing recent New Zealand equipment purchases, partially offset by ongoing periodic finance lease payments.

Turning to Slide 15, which provides some additional detail on our capital expenditure. As we outlined at the top of the table, and I already mentioned, our capital expenditure decreased quarter-on-quarter, around 9% to approximately $54 million. As previously noted, the decrease reflects lower pre-stripping and general operating capital, partially offset by an increase in growth capital.

The decrease in general operating capital largely reflects lower spend at Macraes with the previous quarter, including equipment purchase. In the current quarter, we received $7.8 million spent on two new Macraes excavators by our $10 million equipment finance facility established with Westpac Bank. The facility offered superior terms to vendor finance on that specific equipment. It’s pleasing to see the new excavators contributing to the record mining rate achieved at Macraes in May following the easing of COVID restrictions in late April.

Growth capital increased 24% quarter-on-quarter. The main areas of investment during the quarter were the Haile expansion, which included the tailings wall lift and additional storage capacity, plus ongoing development at the Martha Underground.

First three-meter tailings wall lift at Haile is expected to be included in the third quarter this year. Given the unprecedented levels of rain received in 2018 and again in recent months, the water levels in the current TSF was materially above the modeled amount. As such, we have chosen to continue work to advance the second five-meter lift of a schedule for next year to enhance freeboard. While transitioning straight into that lift off with some potential cost benefits, in doing so, we are bringing forward approximately $15 million of capital into the second half of 2020, previously planned for the next year.

In addition, we’re expecting to spend an extra $10 million to continue expanding project capacity at Haile, this also has been advanced in 2021 to increase short- to medium-term capacity. As from various other revisions to our plans, our year-to-date spend rate, plus an expected $15 million reduction in sustaining capital, mainly pre-strip, our consolidated 2020 capital spend is expected to remain within the previously guided ranges on a group basis. We have, however, provided some updates to reflect these changes.

I’ll now turn back over to Michael to discuss the rest of the presentation. Thank you.

Michael Holmes

Thank you, Scott. And moving on to Slide 17. We are investing in these growth opportunities, and each of them are at different stages. Beginning with the growth in the Americas, the Horseshoe Underground represents the opportunity to add high-grade ore to the existing Haile open-pit production profile. Optimization of the project is currently underway, including an assessment of all the mining scenarios, paste-fill versus cemented rock fill backfill and the development of the deposit from an either a top-down or bottom-up approach.

We expect to complete a feasibility-level economic analysis of all mining scenarios by the end of the year, and total development is on track for 2021. The company is in the final stage of the supplementary environmental impact statement permit process to further expand the Haile operation and mine underground. To date, there have been no objections by any stakeholder group to the SEIS. And at this stage, the company anticipates a successful record of decision and completion of the process by year-end.

In New Zealand, the Golden Point Underground study at Macraes is advancing with an updated NI 43-101 technical report expected to be completed by the end of the third quarter. Golden Point is expected to replace the Frasers Underground and extend the mine life of Macraes. We expect Macraes to be a major source of free cash flow generation for many years to come.

Turning on to Slide 18, the Waihi District overview. Two weeks ago, we were pleased to announce the robust results of the preliminary economic assessment of the Waihi District in New Zealand. We have operated responsibly in New Zealand for the past 30 years, created significant value for shareholders and significant socioeconomic benefits for the host country.

In fact, we’re quite proud of our track record of successfully and responsibly exploring, consenting, developing, operating and rehabilitating mines in country. The components of the Waihi District study are at the Martha Underground, which is fully permitted and currently in development with first production expected in the second quarter of 2021.

The district also includes the Martha open pit Phase 5, which is an additional cutback to the already permitted Martha open pit Phase 4. Near the process plant is a proposal for a small open pit called Gladstone. Approximately 10 kilometers away to the north from the Waihi process plant is WKP, a major discovery with a resource of 1.1 million ounces between 12 and 13 grams per ton.

And this is only based on 35,000 meters of drilling. So we’ll be drilling there for at least the next decade. Our base case utilizes $1,500 per ounce long-term gold price. And under this scenario, the district produces over 2 million ounces of gold for the next 16-plus years at a competitive all-in sustaining costs of $627 per ounce. The after-tax net present value discounted at 5% is USD 665 million. And the corresponding after-tax IRR is 51%. This is a compelling figure that falls well below our cost of capital. At spot pricing of $1,750, an after-tax IRR increases to 75%.

Moving on to Slide 19. Based on the PEA results, the Waihi District has a strong free cash flow generation profile, noting, of course, that half the resources used for the study are currently classified as inferred. This is where one of the opportunities exist for us in the Waihi District. Our expectation is that through the drill bit, we will convert resources and pursue expansions that appear to be significant opportunities for us at the Martha Underground and WKP.

We haven’t fully defined or delineated the resource at Martha Underground, and we continue to believe that WKP will grow into a multimillion ounce deposit. This will take a considerable amount of time to prove up. However, we have initial resource of over 1 million high-grade ounces based on the 35,000 meters of drilling to date as mentioned. And as a reminder, since we acquired Waihi in 2015, we have increased the resources here from 500,000 gold ounces to currently 2.5 million at a discovery cost of less than $20 per ounce.

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Permitting in New Zealand represents both an opportunity and a risk for us at Waihi. With the New Zealand economy heavily dependent on some sectors that were significantly impacted by the COVID-19 crisis, the government has stated its intention to look to other sectors to kickstart the economic recovery. They have mentioned removing the red tape from the permitting process, and that may allow a more streamlined process and thus could mean earlier production.

Conversely, the permitting process may be protracted depending on whether a decision goes to environmental courts and how long it stays there. The typical time frame for a decision by the environmental courts is 12 months, which is what we have conservatively assumed as our base case. It is important to note that WKP and the other opportunities are shovel-ready.

And we look forward to working with the government to bring these projects forward and deliver the significant socioeconomic benefits the district opportunities will bring to the rural communities in the Coromandel. Capital investment for the Waihi District is projected to be approximately $450 million spread over the next nine years, beginning with investments at the Martha Underground this year that are expected to taper in 2021. Balance of the spend is staggered from 2022 to 2028, beginning with the commencement of the initial underground mine development, WKP, and the infrastructure-related to assessing the underground and ending with the spend related to the Martha open pit development.

Our mine plans have been built from first principles and to a high level of detail for the PEA mining inventories they reflect. But as you can see from the robust cash profile, Waihi proves the greatest king and the district even in its early stages continue to deliver more resources at consistently high grades and costs – and supports the cost of development.

Moving on to Slide 20 and in summary, although it has been disappointing to downgrade the outlook at Macraes, we’re pleased to maintain the outlook at – for the Haile despite the challenging first half conditions. We will work tirelessly to manage the near-term risks due to the global pandemic, including safeguarding the health and safety of our workforce. We will continue to proactively make decisions to support the business by adapting to the near-term risks while ensuring we advance our long-term growth initiatives in the optimal time lines we have outlined.

We have a strong asset base, and we have what we believe to be one of the best growth pipelines in the industry, particularly at Waihi. We focus on what we can control. And we have traditionally been a company that has delivered on its commitments and one that has generated strong returns. And that is where we are planning to be again this year as the year progresses, and we expect stronger production in the second half.

We have a strong shareholder register and a group of very supportive shareholders, but we value their support over these challenging 12 months. We recognize that it has been a year of uncertainty, but our resolve to deliver consistent positive results remain strong. Restarting Didipio is a top priority, and we wish we had the time lines to provide to the market. But unfortunately, we do not know when a decision will be made. We continue to engage with all stakeholders and government agencies to renew the FTAA. However, we also need to get on with our business, including advancing what we believe is one of the most robust growth projects in the gold industry at Waihi. Achieving the results of the PEA delivered will be one of the major achievements of OceanaGold’s 30-year history.

Thank you very much. Now back to you, Sam.

Sam Pazuki

Thank you, Michael. That concludes the formal presentation segment of the webcast. I will now turn the webcast over to the moderator to facilitate the Q&A session.

Question-and-Answer Session


Thank you. [Operator Instructions] And your first question will be from Levi Spry of JPMorgan. Please go ahead.

Levi Spry

Good morning, good evening. Thanks Michael. Thanks for the call. Just on Haile and the strong second half, and particularly, the even stronger December quarter. Can you maybe just step me through some of the numbers that I think you’ve previously given that there are material movements in grade? And maybe even just talk a little bit more about the risks to that coming on with a really wet sale?

Michael Holmes

Yes. Thanks very much for that, Levi. We’ve – as we’ve always mentioned, the sort of the profile, the grade profile at Haile is always second-half-weighted with 2/3 of the ounces coming out in the second half. We’re expecting grades in the third quarter to be that sort of 1.8 to 1.9 grams per ton and the fourth quarter at 2.5 to sort of 2.6. We’re continuing to improve with our material movements month-on-month, quarter-on-quarter. And we’re looking at around that 25 million tons movement for the fourth quarter.

What I’ll do is – sorry, for the second half. What I’ll do is I’ll hand it over to Jim Whittaker, who is our General Manager at Haile, just to step through some of the opportunities that we’re seeing and some of the actions they’re working on. Thanks, Jim.

Jim Whittaker

Thank you, Michael, and thanks for the question. Yes. Obviously, as we’ve gone through, despite ongoing challenges with COVID, manpower and also rainfall, we’ve been managing to mine more material quarter-on-quarter, and it’s going in the right direction.

During the second quarter, yes, as you’ve seen by the graphs, we did have some problems accessing higher grades we are expecting to the mill. So this material is now in front of us, and we’ll be attacking that through this quarter.

Some options that we have, we looked around plans that we could get into Ledbetter pit a little bit earlier, and we looked at mine phase designs and redesigns to get the higher-grade ore sooner and basically trying to move less total material to get to the ore quicker. And also, based on the previous agreements we have with Komatsu, we did recently this month, mobilized four additional large Komatsu 73E haul trucks that were originally in the plan for next year. We were able to negotiate that with Komatsu and actually push those financial costs into 2021. And that will help us with not only tonnage, but also streamline the training and reduce our total mining unit cost per ton.

So this is just a few of the things that we’re doing. The focus is obviously really on the mining part and getting back to basics in the drilling and the shovel operation and also making use of the additional 730s.

Levi Spry

Great. And just thinking about the grade, very high grades in that last quarter. How do we think about that pushing into calendar year 2021? I would think most people have the grades falling back towards sort of reserve grades fairly quickly a year or two later, but 2.5 back is one way to fall from? What can you give us there in 2021, calendar 2021?

Scott McQueen


Michael Holmes

Yes. Grades – sorry.

Scott McQueen

Go ahead, Michael.

Michael Holmes

Yes. So the grades will sort of continue into – with the areas that we are into 2021 and the first half of 2021, and then they will drop in the second half of the year, which should be a bit different from us as you – for those that have followed Haile will always seem to come home with a very wet sale in December with some really good grades and really good production, and that’s really happened year-on-year. Next year, you’ll see those higher grades sort of go into the first half of 2021 with the mining sequence showing that the grades will be reduced in the second half of 2021.

Levi Spry

Yes. Okay. Thank you. And maybe – so obviously a question of just the – of the account of the presales, mainly for Scott, the 48,000 ounces at $1,635, what happens to the other $300? Do you get that? Or other guys have already bought to get that?

Michael Holmes

Over to you, Scott. You’re on mute.


Hello. Mr. McQueen, could you please unmute your line? Please stand by.

Levi Spry

That’s cool. I can follow up later.

Michael Holmes

Sorry, it’s – Levi, the gold is already sold. So yes, we don’t get the additional.

Levi Spry

Yes, that’s great. Thanks Michael. Thank you. Excellent.


Thank you. Do you have any further questions, sir?

Levi Spry

No, thanks. That’s great. Thank you.


Thank you. [Operator Instructions] And at this time, it appears we have no further questions registered. I would like to turn the call back to Mr. Pazuki.

Sam Pazuki

Thank you, operator. That was easy. That concludes our webcast and conference call. A replay will be available on our website later today. On behalf of Michael, Scott, Mark, Jim and the rest of the team, thank you for joining us. Bye for now.


Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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