OceanaGold reports 3Q21 financial results

Highlights

• Didipio’s financial or technical assistance agreement (FTAA) renewed for 25 years.
• Total recordable injury frequency rate (TRIFR) increased from 3.7 to 3.9 per million hours worked.
• Year-to-date (YTD) consolidated gold production of 256 216 oz at all-in sustaining costs (AISC) of US$1218/oz on gold sales of 276 226 oz.
• Consolidated 3Q21 gold production of 79 177 oz at AISC of US$1200/oz on gold sales of 97 445 oz, including 19 151 oz of gold sold at Didipio.
• YTD revenue of US$536.1 million with adjusted EBITDA of US$259.2 million and adjusted net profit of US$111.7 million or US$0.16 per share.
• 3Q21 revenue of US$204.6 million with adjusted EBITDA of US$97.3 million and adjusted net profit of US$53 million or US$0.07 per share.
• Total immediate available liquidity of US$143.2 million, including US$113.2 million in cash and US$30 million in available undrawn credit facilities as at 30 September 2021.
• Successfully completed transport of Didipio gold-copper concentrate in inventory early in 4Q21.
• Commenced underground mining at Didipio, one month ahead of schedule and delivery of underground ore underway.
• Paul Benson appointed Chairman of the Board, effective from 1 October 2021.
• Full year 2021 production guidance of 350 000 – 370 000 gold (Au) oz at AISC of US$1200 – US$1250/oz sold reaffirmed.

Scott Sullivan, Chief Operating Officer and Acting CEO of OceanaGold, said: “I am very pleased with the financial performance of the business driven by strong EBITDA and profits. The main drivers of this financial performance relate to a strong quarter at Haile and Didipio, where we are pleased to announce the completion of gold-copper concentrate transportation. Despite this strong performance, we have much work ahead of us to progress the safe restart of Didipio processing and mining operations, complete the Haile Technical Review and get the New Zealand operations back on-track while continuing to manage the ongoing risks associated with the pandemic.”

“The Didipio restart activities continue to exceed our expectations with recruiting and training activities progressing to plan despite the ongoing risks associated with COVID-19. We are pleased to announce the resumption of underground mining and the delivery of underground ore to the ROM pad early in October, one month ahead of schedule. Stope development is expected to commence in the coming weeks and we will continue to ramp-up underground operations to full mining production rates over the course of the next 8 – 9 months. Processing activities are tracking ahead of plan with recommissioning of the primary crusher completed in 3Q21. We expect milling at Didipio to recommence in mid-November with ore sourced primarily from stockpiles and supplemented progressively with higher-grade underground ore.”

“At Haile, the operation achieved a better-than-expected quarter of production with costs in-line with expectations. Although 4Q21 is expected to deliver softer production from mining and processing of lower grades, we are well positioned to finish the year strongly. We are pleased to increase Haile’s 2021 production range to 175 000 – 180 000 oz of Au reflecting the better-than-expected operating performance over the first nine months of the year. The Haile Technical Review continues to advance well, and we are expecting to complete a new mine plan within 1H22.”

“In New Zealand, both operations were adversely impacted by the two-week nationwide lockdown. At Waihi, the impact related to the shutdown and subsequent regional lockdowns was greater than first expected with carry over impacts in our supply chain beyond the two-week closure. Additionally, recent updates to the resource models impact material planned for 4Q21. As a result, Waihi is now expected to deliver 30 000 – 35 000 oz Au for the full year. Despite the challenges Waihi has had recently, ramp-up of Martha Underground mining rates continue to advance and the company expects a stronger 4Q21 and 2022. At Macraes, we are focused on delivering a strong 4Q21 of production to achieve the narrowed guidance range of 138 000 – 143 000 oz.”

“Looking ahead, the company reaffirms its full year guidance range of 350 000 – 370 000 oz Au at an AISC of US$1200 – US$1250/oz sold.”

Operations

Consolidated gold production for the YTD 2021 was 256 216 oz, including 79 177 oz in 3Q21. YTD gold production increased 27% above the prior YTD driven by higher production from Haile partially offset by lower production at Macraes. 3Q21 gold production decreased 16% due to softer production from the New Zealand operations, principally related to the two-week nationwide COVID-19 lockdown and lower production at Haile from lower grades as expected. YTD and 3Q21 consolidated AISC were US$1218/oz and US$1200/oz on gold sales of 276 226 oz and 97 445 oz, respectively. AISC was flat q/q and YTD, attributable to higher gold sales that are largely offset by higher sustaining capital investments.

In the Philippines, the government renewed the Didipio FTAA for an additional 25-years effective 19 June 2019. The renewal in mid-July paved the way for the resumption of operations and commencement of restart activities including the recruitment and training of the workforce, delivery of equipment and supplies, the transportation and sale of gold and copper inventory (both doré and concentrate), process plant maintenance and recommissioning and underground inspections and upgrades.

The Didipio restart activities continue to advance well with recruitment tracking to plan. The Company expects 90% of the workforce to be in place by the end of the year subject to continued management of COVID-19. Process plant restart activities continue to progress ahead of expectations with recommissioning of the primary crusher completed prior to the end of the quarter, completion of upgrades to the Ball and SAG mills and delivery of supplies ahead of first ore feed in mid-November. Underground mine inspections were completed in 3Q21 along with upgrades and delivery of new Sandvik equipment. In 3Q21, the Company began ore mining, one month ahead of schedule while stope development is expected in November. First underground ore was delivered successfully to the ROM pad at the end of 3Q21.

During 3Q21, the company sold 19 151 Au oz and 3356 t of copper from inventory on hand at Didipio. All gold-copper concentrate has been delivered successfully to the San Fernando port and the company has received US$38 million of cash as at the end of 3Q21. The company expects to progressively receive all payments associated with the sale of gold-copper concentrate prior to the end of the year.

In the US, Haile produced 147 491 oz of gold YTD, including 45 910 oz in 3Q21. Haile’s YTD production was 67% higher than the corresponding period in 2020 due to increased head grade as expected and operational improvements. 3Q21 production was slightly lower than the previous quarter; however, a positive reconciliation led to better than planned production for the quarter. Haile’s YTD AISC was US$1028/oz and cash costs of US$653/oz on gold sales of 148 529 oz. 3Q21 AISC and cash costs were US$1208/oz and US$581/oz on gold sales of 44 013 oz.

In New Zealand, Macraes delivered YTD gold production of 92 902 oz, with lower-than-expected gold production of 25 720 oz in 3Q21. YTD 2021 gold production was approximately 9% lower than YTD 2020 due to geotechnical challenges at Coronation North leading to reduced mining rates in higher grade ore zones and extended downtime related to planned and unplanned process plant maintenance leading to decreased throughputs. 3Q21 production was 21% lower than in the 2Q21 mainly related to the two-week nationwide lockdown and subsequent slower than expected ramp-up of operations. Macraes’ YTD AISC was US$1468/oz sold while 3Q21 AISC was US$1573/oz sold. The Waihi operation produced 7547 oz of gold in 3Q21, and 15 823 oz YTD. The YTD production was approximately 30% higher due to ongoing ramp-up of Martha Underground. 3Q21 production increased q/q following the completion of plant upgrade works in 2Q21. The q/q increase was partially offset by the two-week nationwide lockdown and slower than expected subsequent ramp-up of operations. Waihi’s YTD AISC was US$1589/oz while 3Q21 AISC was US$2072/oz sold.

Outlook

On a consolidated basis, the company expects to achieve its full year gold production guidance of 350 000 – 370 000 oz at an AISC of US$1200 – US$1250/oz sold and cash costs of US$725 – US$775/oz sold. The consolidated guidance reflects the changes to the Haile and Waihi guidance ranges and is inclusive of Didipio’s 4Q21 guidance.

In the US at Haile, the stronger than expected production YTD has a resulted in the company increasing Haile’s full year outlook, whereby production is expected to range between 175 000 – 180 000 oz Au compared to 160 000 – 170 000 oz Au previously guided. Haile’s 2021 AISC guidance range remains unchanged at US$1100 – US$1150/oz Au sold and at a lower cash cost of US$650 – US$750/oz sold.

The Haile Technical Review continues to progress with a comprehensive review of mining and processing operations, costs, capital investments and water and waste management including opencast /underground tradeoff studies. This review is expected to reflect historical and forecast operational data and cost inputs and resequencing of mining activities, with an aim to maximise cash flows over life of mine while incorporating more effective capital allocation. The company expects an updated mine plan in 1H22, with ongoing implementation of operational changes and value realisation over the next 18 months.

The timing of a new mine plan is also dependent on receipt of the SEIS final record of decision and associated permits. Based on feedback from regulators, the company now expects the record of decision and related permits to be completed within 1Q22. These permits relate to the expansion of the operating footprint to accommodate waste stockpiles, increased capacity through the water treatment plant, as well as development of the Haile Underground. Engagement with the US Army Corps of Engineers and South Carolina Department of Health and Environment Control is ongoing as the company responds to inquiries received post release of the draft SEIS.

The company expects Macraes’ gold production for the full year to range between 138 000 – 143 000 oz Au from 135 000 – 145 000 oz previously, with higher throughput and stronger grades expected in 4Q21. Following the two-week New Zealand national lockdown, the ramp-up of operations in September was slower than initially expected. Now into 4Q21, Macraes operations are ramping-up to expectations. The Macraes AISC guidance range remains unchanged at US$1300 – US$1350/oz sold.

The Waihi operation is expected to produce between 30 000 – 35 000 oz of gold compared to its original 2021 guidance range of 35 000 – 45 000 oz of gold. The decrease in forecast output is due to resource model updates affecting material planned for 4Q21 related to grade reconciliation. The company does not expect this to have a long-term impact on the operation, with resource definition and grade control programmes well advanced. The COVID-19 two-week lockdown compounded the impact by deferring alternate high-grade panels to 2022. The Waihi AISC guidance has been revised to US$1525 – US$1575/oz sold.

Preparation for the lodgement of a consent application for the Waihi North Project, inclusive of Wharekirauponga (WKP) Underground Mine, continued to progress with environmental assessments nearing completion. The company expects to lodge its formal consenting application inclusive of stakeholder feedback with the regulator in 1H22. The company continues to advance the technical studies as part of the consenting and re-feasibility study (PFS) workstreams. This work is ongoing and supported by resource conversion drilling at WKP. Although the PFS is contemplated for completion in 1H22, the company may increase the scope of the work and expand drilling efforts to further enhance the project value proposition. The impact on the timing of such work is being considered and could result in extending the date of completion of the study.

In the Philippines, the company will continue to advance restart and ramp-up activities while managing the ongoing risks associated with COVID-19. For 4Q21, Didipio is now expected to produce between 7000 – 12 000 oz Au (previously 5,000 to 10,000 oz of gold) and 1,000 tonnes of copper with the range reflecting the ongoing risks noted. For the full year, Didipio gold sales are expected to range between 25 000 – 30 000 oz while copper sales are expected to range between 4500 – 5000 t. 2021 AISC is now expected to be between US$100 – US$150/oz sold while by-product cash costs are expected to range between US$25 – US$75/oz sold with higher copper pricing increasing by-product credits. Full year 2021 sales are expected to range between 25 000 – 30 000 oz Au and 4500 – 5000 t of copper.

Looking ahead to 4Q21, the company expects milling at Didipio to commence in mid-November, with ore feed sourced primarily from lower grade stockpiles and supplemented with higher grade underground ore as the underground mining operations ramp-up. Underground mining activities have commenced, one month ahead of schedule and the company expects first stoping in November, also ahead of schedule.

Read the article online at: https://www.globalminingreview.com/finance-business/29102021/oceanagold-reports-3q21-financial-results/