OceanaGold reports 2020 financial results
Published by Jessica Casey,
Global Mining Review,
OceanaGold Corp. has reported its full year financial and operational results for the year ended 31 December 2020. This follows the release of the preliminary 2020 production and costs dated 18 January 2021.
Additionally, the company has provided a multi-year outlook of its business including detailed 2021 guidance. The guidance and outlook exclude any contribution from the Didipio Gold-Copper Mine in the Philippines and the company would provide a subsequent update to forecasts when the timing of a restart at Didipio is confirmed.
2020 financial and operating highlights
- Total recordable injury frequency rate (TRIFR) of 3.3 per million hours worked compared to 3.6 per million hours worked at the end of 2019.
- Maintained MSCI ESG ‘A-rating’; released an updated statement of position on climate change with a goal to achieve net zero operational greenhouse emissions by 2050.
- FY20 consolidated production was 301 675 oz of gold including 4Q20 production of 99 155 gold oz, a q/q increase of 57%.
- Full year all-in sustaining costs (AISC) of US$1278/oz on sales of 310 531 oz of gold.
- Fourth quarter AISC of US$1080 per gold ounce sold, a 36% decrease q/q.
- Full year revenue of US$500 million including 4Q20 revenue of US$168 million.
- Full year and fourth quarter adjusted EBITDA of US$165 million and US$70 million, respectively.
- Fourth quarter adjusted net profit of US$2 million compared to an adjusted net loss of US$15 million in the previous quarter.
- Full year operating cash flow of US$199 million, reflecting adjusted cash flow per share of US$0.22.
- New US$250 million revolving credit facility with maturity date of 31 December 2024.
- Immediately available liquidity of US$229 million, including US$179 million of cash on hand.
Multi-year outlook (2021 – 2025)
- 2021 production range of 340 000 to 380 000 gold oz at AISC of US$1050 to US$1200/oz sold, reflecting an approximate 20% increase in production from 2020 at approximately 12% lower AISC.
- Increasing 5-year production to over 500 000 oz of gold with increasing margins on lower costs and decreasing expansionary capital investment.
- Strong production outlook underpinned by completion of low-cost organic growth projects in favourable jurisdictions (North America and New Zealand).
- First production from Martha Underground achieved, continuous milling expected to commence late 2Q21.
- Golden Point Underground portal development advancing with first production expected in 4Q21 and access to opencasts underway to deliver on mine life extension.
- Haile Underground on-track with portal development commencing in 3Q21.
- Significant exploration programmes ongoing at Waihi in New Zealand with an updated resource and prefeasibility study expected for WKP in 2H21.
- Advancing the company’s commitment to achieve net zero greenhouse emissions by 2050 from its operations by establishing interim emission targets by the end of 2021.
Michael Holmes, President and CEO of OceanaGold, said: “As we close the books on 2020, we look ahead to 2021 and beyond where we expect a very exciting period for the company and our shareholders. OceanaGold has one of the premier growth pipelines in the industry. This includes bringing three new underground mines into production over the next 3 years with Martha Underground already producing, Golden Point Underground at Macraes where first production is expected in 4Q21, and the Haile Underground where development is expected to commence in 2H21. These three projects alone are expected to deliver more than an 75% increase in production relative to 2020 at decreasing costs and increasing margins.”
“Additionally, we are very excited with our exploration results at WKP as we continue to advance this world-class prospect. Based on the comprehensive plans we provided to the market last year, first production from WKP is targeted for 2026. However, in response to COVID-19 economic recovery plans, in conjunction with stakeholders we are investigating opportunities bring forward high-grade production into our 5-year plan in a responsible and sustainable manner. The significant growth projects in New Zealand are expected to deliver substantial socio-economic benefits including an additional 300 new jobs for local rural communities.”
“Finally, at Didipio, we continue to work with the National Government on the renewal of the Didipio FTAA. After strong positive engagement with the Philippine Departments of Finance and Environment and Natural Resources in December, the renewal is pending re-endorsement by those Departments to the Office of the President for approval. We are committed to returning thousands of Filipinos, the majority of whom reside in the rural communities in the provinces of Nueva Vizcaya and Quirino, back to work to operate one of the most responsible mining operations globally. Didipio stands poised to provide much needed economic benefits to the local communities that are recovering from the social and economic impacts of COVID-19 and OceanaGold is committed to supporting that recovery.”
2020 financial results
Fourth quarter revenue increased nearly 72% q/q, reflecting higher gold sales from Haile and Macraes and the resumption of production at Waihi. For the full year 2020, the company generated US$500 million in revenue including US$168 million in 4Q20. Revenue decreased y/y primarily due to limited sales from Didipio and lower annual production from Waihi as development of Martha Underground progressed, both partially offset by a higher average gold price received.
4Q20 adjusted EBITDA of US$70 million increased significantly over the previous quarter reflecting stronger production from Haile and Macraes and the resumption of production at Waihi. Full year adjusted EBITDA of US$165 million decreased year-over-year primarily due to the significantly reduced sales from Didipio.
Fourth quarter adjusted net profit was US$2 million compared to an adjusted net loss of US$15 million in the prior quarter. For the full year 2020, the company recorded a net loss (after impairment charge) of US$150 million including a net profit of approximately US$4 million in 4Q20. The full year net loss included a pre-tax impairment charge of US$80 million in relation to the uncertainty of timing of a re-start at Didipio.
4Q20 operating cash flows of US$1.6 million were lower q/q due to the unwinding of the gold prepay arrangement from earlier in the year and New Zealand income tax paid of US$18 million in relation to the 2018 tax year. Annual operating cash flows of US$199 million were a modest decrease y/y and attributable to reduced cash flows from Didipio and Waihi, partly offset by the US$77 million received from the gold pre-payment arrangement.
Cash flows used in investing activities for the full year of US$226 million decreased over the prior year primarily due to lower capital spend at Didipio and the sale of non-core equity investments. For FY2020 and 4Q20, cash from financing activities of US$160 million and US$117 million, respectively, reflects the US$50 million debt drawdown under the revolving credit facility in the first quarter and proceeds of US$122 million from the issuance of shares in 4Q20.
As at 31 December 2020, the company had available liquidity of US$229 million, including US$179 million in cash and US$50 million in undrawn credit on the new US$250 million revolving credit facility maturing of 31 December 2024. The company’s hedging programme was fully closed out on 31 December 2020.
The company expects to produce 340 000 – 380 000 gold oz at AISC of US$1050 to US$1200 per ounce sold and cash costs of US$750 to US$850/oz old. The 2021 production guidance range represents an approximate 20% increase in gold production along with a 12% decrease in AISC.
The ompany will continue to invest in high-margin production growth including the development of new underground mines at Martha (Waihi), Golden Point (Macraes) and Haile while continuing to invest in the high-yielding near-mine exploration program underway.
Total capital investments for the full year are expected to be US$280 - US$310 million, including US$165 – US$185 million for growth capital and US$85 – US$110 million for sustaining capital.
Haile is expected to produce between 150 000 and 170 000 oz of gold at cash costs of US$750 to US$850/oz sold and site AISC between US$950 to US$1100/oz sold in 2021. This expanded range reflects ongoing risks related to continued uncertainty of the impact of COVID-19 in the US and the well above average rainfall experienced over the last few years, both of which had material adverse impacts on operations in 2020 when the operation experienced 60 lost mining days.
Haile’s 2021 production and cost ranges are based on operational plan that includes mining of 35 million – 40 million t of material including 3.5 million – 4 million t of ore. Approximately 60% of Haile’s 2021 production is expected in 1H21 at correspondingly lower AISC due to mine sequencing on higher grades mined and processed. Ledbetter Phase 1 and Snake Phase 2 opencasts will be the primary ore sources in 1H21 with concurrent pre-stripping at the Haile opencast which becomes the primary ore mining source in 2H21. The 2021 mine plan is expected to increase mining faces from three at the end of 2020 to five by 2H21, which should allow for increased operating flexibility. The company expects to mill between 3.6 and 3.8 million t of ore in 2021 with an average head grade between 1.6 g/t and 1.7 g/t and average recoveries of 82 – 83%.
Haile’s 2021 capital programme will focus on delivery of critical tailing storage facilities (TSF), water treatment and PAG waste cell infrastructure, while progressing development of the Horseshoe Underground Mine (HUG). The company expects to invest US$115 – US$125 million in growth projects, approximately two-thirds of which relates to those infrastructure projects with the balance for HUG, where development is expected to begin in 2H21 pending receipt of mining permits. Sustaining capital investments of US$35 to US$45 million will include pre-stripping at the Haile and Mill Zone opencasts, as well as TSF lifts that support current operations.
Macraes is expected to produce between 155 000 and 165 000 oz of gold in 2021 at cash costs of US$700 – US$800/oz sold and site AISC of US$1000 to US$1100/oz sold. The production profile by quarter is expected to be relatively consistent throughout 2021.
Portal development for Golden Point Underground (GPUG), pre-stripping of the Deepdell opencsat and expansion of the Fraser’s opencast including Frasers West and Gay Tan pits all commenced at the end of 4Q20. These projects are expected to extend the mine life at Macraes to 2028 with forecast production of 1.1 million oz over the period. GPUG is expected to commence production in 4Q21 supplementing, and eventually replacing, underground production from Frasers Underground which is expected to conclude in 2H22.
Macraes’ 2021 capital programme is focused on progressing the mine life extension projects mentioned above. The company expects to invest US$10 to US$15 million in growth capital primarily attributable to GPUG portal development. Sustaining capital investments of between US$35 and US$45 million are approximately equally divided between pre-stripping at Deepdell and Frasers opencasts and infrastructure-related spend to support the mine life extension projects, including TSF lifts and definition drilling.
The company’s New Zealand dollar gold hedging programme was closed out as at the end of 2020 and the company currently has no further hedging programmes in place.
Waihi is expected to produce between 35 000 and 45 000 oz with cash costs ranging from US$1000 to US$1100/oz sold and site AISC ranging from US$1350 to US$1450/oz sold. The 2021 production profile is second-half weighted with continuous stope production from Martha Underground (MUG) commencing late in 2Q21, and the higher 2021 AISC reflects the associated ramp-up of the mine.
Development of MUG progressed 7371 m in 2020 and the company expects continued development and ramp-up of operations over the next few years. First gold production from MUG occurred at the end of 2020 with additional production in 1Q21 expected ahead of a mill shutdown to install a new SAG mill shell. Mining of Martha Underground will continue and ramp-up with ore stockpiled ahead of continuous milling starting late in 2Q21.
Waihi’s 2021 capital programme reflects remaining investment on MUG development and associated infrastructure as well as the SAG mill upgrade. The company expects to invest US$40 to US$50 million in growth capital attributable to MUG underground development. Sustaining capital investments of between US$10 and US$15 million reflect a portion of MUG development costs, resource conversion drilling and other minor projects.
Didipio is excluded from 2021 guidance, and holding costs are expected to be in the order of US$1.5 million per month as the renewal process of the FTAA continues. Achieving steady state production at Didipio will be dependent on the timing of the FTAA renewal and workforce recruitment efforts. The company will provide updated guidance when the timing of a restart at Didipio has been confirmed.
In December 2020, the company had multiple meetings with national government officials on the FTAA renewal proposal. The company remains hopeful that the renewal proposal will be re-endorsed and forwarded to the Office of the President (OP) for final approval. The company will continue to engage with government officials and will work with stakeholders to ensure a safe restart of operations at Didipio. Detailed planning and consultation is underway for recommencement of operations subject to final approval of the FTAA renewal from the OP. The timeline for renewal remains uncertain and achieving steady state production will be dependent on the timing of the renewal and workforce recruitment efforts.
Exploration in 2021 is focused on supporting existing operations while progressing near-mine organic growth projects. The bulk of exploration investment is allocated to the Waihi district including WKP and MUG where the company plans to drill approximately 10 000 m and 27 000 m, respectively, at a total investment of US$15 to US$20 million. The company expects to provide an updated resource estimate for WKP in 2H21 that incorporates results from both the 2020 and 2021 drill programmes. Beyond Waihi, the balance of exploration investment is allocated to continued infill and extensional drilling at GPUG, future underground opportunities near GPUG, opencast expansions at Macraes and underground growth opportunities at Haile.
Over a 5-year period ended 31 December 2025, the company expects to produce an annual average of approximately 450 000 gold oz with AISC averaging US$1050/oz sold with the commissioning of three new underground mines (MUG, GPUG and HUG) and expansion of the opencast operations at Haile and Macraes.
In New Zealand, the company expects to ramp-up to full production at MUG in 2Q21 with annual production increasing to 90 000 to 100 000 gold oz per year. GPUG at Macraes is expected to produce 40 000 to 50 000 gold oz annually beginning in 2022 and supplement expansion of the Deepdell and Frasers opencasts. At Haile, HUG is expected to deliver 70 000 to 90 000 gold oz annually beginning in 2023 and both supplement and de-risk opencast production.
Read the article online at: https://www.globalminingreview.com/finance-business/22022021/oceanagold-reports-2020-financial-results/
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