Q4 2019 Earnings Call

Thursday

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Good morning, and afternoon, ladies and gentlemen, and welcome to the oceanagold 2019 full year Financial results webcast and conference call at this time. All lines are in a listen-only mode following the presentations. We will conduct a question-and-answer session. If at any time during the call you require me to TAP assistance, please press * 0 on your keypad know that this call is being recorded Thursday, February 20th at 4:30 p.m. Eastern time and I would like to turn the conference over to San Jose. Go ahead sir.

Thank you operator good evening. Good morning and welcome to oceanagold fourth-quarter and full-year 2019 results webcast and conference call. I am Sam Pizookie the vice president of a guest relations for oceanagold. I am joined today by Mick Wilkes president and CEO of oceanagold along with Michael Holmes Chief Operating Officer and Scott McQueen Chief Financial Officer for this webcast. We will initially discuss our 2019 operational and financial performance and we will then shift the focus of the presentation to the upcoming year before returning it to you for questions moving on to slide number two before we proceed note that the references in this presentation adhere to International financial reporting standards and all Financial figures are denominated in US Dollars unless otherwise stated also note that the presentation contains forward-looking statements which by their birth

nature or subject to some degree of uncertain

T there can be no assurances that are forward-looking statements will prove to be accurate as future results and events could differ materially, please refer to the disclaimer on for wage statements in our presentation. I will now turn it over to Mike Wilkes.

Thank you, Sam. And hello everybody. It's a pleasure to be with you today from New Zealand as I've noted before 2019 with the challenging year for us. We did close the year on a positive note with strong operational and financial performance from hail and our New Zealand operations wage, which delivered an increase of nearly twenty percent in Gold production quarter-on-quarter while all-in sustaining costs decreased 13% and hail production increased 26% from the third quarter while costs continue to train Wala. In fact seems to start a 2019 we reduced our all-in sustaining costs by approximately 40% over the course of the Year morning unit cost increase from $5.55 per tonne behind in the fourth quarter of 2018 to just $3 per ton mine in the 4th.

quarter of

Nineteen Processing Unit costs $14.81 per ton melt into for 2018 and just over $12 per ton melt in Q4 29th. We expect the unit cost to continue to Trend lower in 2020.

McCray's also delivered a strong quarter of Productions, which increased 20% quarter-on-quarter while why he delivered steady production as expected fourth quarter a pack on a fully-diluted basis was better than previous previous. Korar the previous quarter in line with analysts' consensus figures despite improve performance at the other sites fourth-quarter earnings were impacted by the continued suspension of operations at the DPO with higher corporate General and administrative costs including approximate wage ten million dollars in carrying costs to maintain to keep you in a state of operational readiness.

Fourth-quarter cash flow per share before working capital and on a fully-diluted basis was $0.02 higher than the previous quarter at 7 cents wage in the fourth quarter. We continue to advance the market underground development in approximately approximately 830 meters of development and completion of the ventilation shaft between the levels wage and nine hundred rights developments over the course of the year is expected to gradually increase and we're on track for first production off the second quarter of 2021 expiration continues to yield positive results particularly at waihi where we focused drilling at the Mater underground in w k p projects just last week. We announced an updated resource for Market underground project which included a significant increase to indicated resources dead.

It's nasty.

824000 ounces of gold while inferred resources set at 614000 ounces the average grade for both categories that Martha had also increased from the previous resource moving on to slide for an hour EST update.

Shianna called is operated a sustainable business for the past Thirty Years by applying robust EST practices across our business. We are proud of our ability to discover dead bodies still projects operate minds and rehabilitate depleted lines. This is clearly demonstrated by the work. We've been doing at the recent line on the west coast of the South Island, New Zealand.

You can see from the photo on the left at the clock it which operated for about nine years is transforming into a new fresh water lake surrounded by native forest. And since the mileage closed in 2016, we have completed over 100 hectares of Rehabilitation and planted more than seven hundred thousand native seedlings with another 300,000 seems to be planted either the next three years on the social front. We are grateful for the strong show of support from the company for the company. Did you get the mind and the renewal of the FDA at a public rally in Manila is shown on the middle photograph?

the proxy

Currently twelve hundred members of host communities including indigenous peoples traveled ten hours each way to rally for two hours in front of the presidential Palace.

ESG is Tianna called is a topic G performer. It's basically the major rating agencies. Although we are proud of our performance and the programs we have that we can always do better.

Driving for improvements in health and safety continues to be a critical component of our business in our total recordable injury frequency rate improved in 2019.

Leaving on to slide five and discussion about the DPA. The resumption of operations is our top priority the FDR renewal process currently sits with the Office of the President after it was really endorsed by the department of environment and natural resources and the mines and geosciences be ready before Christmas.

We have we've had good engagement with national and local stakeholders and support from different levels of government and the Regulatory Agencies. We have lunch time that work for us to continue in a state of operational Readiness. So we can ramp up following the resolution. We've maintained this state of operational residence since wage forced to suspend operations in October 2019. However, we cannot continue this state indefinitely. If operations are permitted to recommend, then we believe we can achieve full rights of production the ten thousand ounces of gold plus 1000 tonnes of copper per month within four to six weeks before price for permits are not received and we decide to proceed to full care and maintenance significant Workforce reductions would result and we may be looking at a ramp up time.

action of up to 12

Months moving on to slide six and the voice of our host communities as I mentioned before we are thankful for the overwhelming support from a host communities since July 2019 thousands of people have come together to organize rallies to support the renewal and the lifting of the barricade imposed by the provincial Governor. Community groups have held dozens of meetings with government officials and submitted dozens of letters of support to the Office of the President the communion want this line and they want oceanos got work to continue. The DPR. Mine has changed the lives of tens of thousands of people for the better.

Families across the provinces have never been Sky up and clean all had jobs access to improved Health Services better schools better roads access she gets in a better quality of life because of the DPO mine.

Proud of the work that we have done at the DPR and the Partnerships we have built with communities.

Email sent it over to Scott to discuss the financial results.

Thank you. Everyone for the next few slots will cover some key aspects of our fourth-quarter and full-year 2019 financial performance.

You got the slide Revenue in the fourth quarter increased approximately fourteen percent from the previous quarter to the higher gold sales from the Crave and tail which both demonstrated strong operational performance 40 revenue or 651 with you was lower than the previous years into the absence of sales from the Depot in the second half of the Year. This was partially offset by the average total price received.

Increase 33% quarter-on-quarter on a higher revenues just partially offset.

But higher corporate General administrative costs now it's the cost incurred to maintain video that state of operation readers were included as part of corporate DNA costs in the fourth quarter totaled approximately ten million. In addition to this. We had three point four million dollar non-cash write-offs related to Prior production taxes in the Philippines as a result. These two factors combined standing in the corner by around $0.02 a year on eBay reflects the second half suspension at the GTI and the associated cost to maintain the asset state of operational readiness.

Big profit for the quarter was like seven million while adjusted net profit was a -0.7 million after adjusting for unrealized gains on ages of Thirteen point four million and the right off of approximately four million dollars of exploration costs associated with joint venture agreement terminated during the quarter net profit for the year is 14.5 million and the profits for the full year was 32.1.

They're going to the cash flows One summary on flag 9.

Operating test size increased quarter-on-quarter the 46.7 million or 7 cents per share with a minimal change in net working capital increase in operating cash flow as a result of a higher wage, which is partially offset by the absence of styles from the DVR and the associated carrying costs already noted investing and financing cash lights are similar quarter-on-quarter off the food year the increase in investing cash flow largely reflected higher exploration costs related to the group projects in the widely District year-on-year decreasing down like mainly to the discretion and get retirement tonight in 2018.

And it's like ten included some additional detail on our capital expenditure.

Who needs capital expenditure and 29 and the bottom line is regarding strange a $240 million investment in Gross Capital mainly at Whiting the start of development of Martha. And of course the continuation of this expansion investment in exploration in Hawaii District continues to yield strong results resource growth just announced Samantha on the ground last week.

Moving on to slide eleven and a snapshot about balance sheet.

Is that the end of 2019 cash balance was $49 giving it for immediately available liquidity ninety nine million and they didn't get increase slightly to a hundred and seventy nine million primarily as a result of the increase of approximately thirty two billion dollars in equipment places where the new Fleet is being progressively added in support of the expansion increased production rates off.

I promise you continue to have relatively low financial leverage with a net debt-to-ebitda ratio of 0.8 for the sport of a long-term bank is previously announced we agreed amendments to our facilities in November, whereby we eliminated the 50 million sit down and extended the maturity until the end of 2021 before moving to Georgia outlook for 2020 extender a minute. Just having a look at slide twelve which shows how we've managed our balance sheet over the past several years. It's always been managing the phone now, but not carrying excess levels of debt leverage has been increased as required to support growth and then reduced rent reduction in production mode and free cash flow of ours clearly dead to buy the cracks where leverage increased to repeat construction to get there around 20 2012 and also hiring 2017 both followed by periods of debt reduction as for

Recently you were to call a discretionary.

That sometime in the sixty million in like 28 again.

Continue suspension of operations at the DPR even text and test flights monitoring pretty levels constantly and have options at our disposal to manage through the uncertainty and continued support the growth projects in our business office assistant in that process with the Amendments made to the facilities and like 2019. We will continue to focus on executing proven options as required to support the continued delivery of Life projects, including the extension of the whole mind the development of the underground Atlanta. So the drilling a w k t and license of 9 extension options in the grounds, I'm moving to the Outlook slide 14 is you know, we published have 20/20 guidance a couple of weeks ago on a Consolidated basis excluding to get the early stage. We expect to produce between $360,000 and $380,000 of gold which is similar to what we delivered in 2019 from those operations.

well in sustaining costs are expected to range between

1075 and $1,125 Grant Soules expected to produce approximately 25% more diverse. You are setting the decrease in production at light bulb for the newer complete where we will complete money and nobody in this quarter before production from underground into YouTube 2021.

A capital investment program for 2020 includes an increase increase tripping Insight money infrastructure associated with the hell extension where we are bringing forward to and Pete's originally planned to my name is 21.

Capital associated with the development of the underground project and the road realignment and the movement of underground of mine is the structure.

McCray's to allow for future production your expiration spending approximately half out of the previous year. We had narrowed her Focus to support the current line plans Martha m

tomorrow to discuss more details

operation

Thank you, Scott and hello, everyone.

Maybe on the slide fifteen and the overview of the 2020 Highlander 2019 on a high note 26% higher production and lower costs down to the third quarter. In fact how improved every quarter through 2019 as productivity increased and unit costs decrease. We expect continued to improve this year through our larger Mind program and utilisation of the newly built and commissioned mining equipment. How is expected to produce between 180 and 1000 thousand ounces of gold which represents an approximate 25% increase in gold production from 2019. The site all-in sustaining costs are expected to decrease and range between $1,080 and $1,150 around sold while mining unit costs are expected to decrease

Please as a year progressed.

It's house production profile is second half white with two-thirds of the years gold output expected in the second half of the year, which is driven by the mining a high of the coverages are expected in the second half consistent with higher grades and embedded process plant improvements. We expect production to increase every quarter of the Year while the orange sustaining costs are expected to decrease each quart pails, all-in sustaining costs will be significantly higher than the first part of the package allowing the second half to average out to our guidance range.

Martin writes will increase significantly this year as we plan to my line between 50 and fifty five million tons of material including three-and-a-half to four million tons of all off this compares to approximately twenty-five million tons of material mined in 2019. The mining activities will be supported by the new 15 new, 2038 200 always trucks of which we currently have 12 in service and expect or 15 to be online by the end of the first quarter which is ahead of schedule in addition to these large trucks. We have upgraded the fleet with one Komatsu PC 3000 excavator to Komatsu PC 4,000 shovels and could you send me the size drinks to support the increase learning rates the process plant continues to achieve higher throughput rates and we expect the middle.

approximately 40

Descent moral this year than in 2019.

We have recently completed the conditioning of the stigma which is the last component of the upgraded regarding service our Focus for the processing plant now turns to improve coverage while continuing continually increasing throughput as I mentioned with the enhancement of the I can put operations. We are revisiting the whole shoot underground mine played. This study work is underway and will include further analysis of the appropriate backfield to use which will dictate the mining sequence. We will also suck the money Fleet that will support underground operations and use technology similar to what we implemented at the dbo.

We expect to have more details on this work in the second half of the year. However, we were lucky to the start of the portal development to 20 21 the cap off the price capital for 2020 does not include the Horseshoe underground development.

in the main

Honda payment think of a horse shoe on the ground is progressing to plan and we expect a notice of decision from the u.s. Army Corps of Engineers in the near-term.

The guards Capital Investments are highly I purchased on the expansion of the mining operations which includes a 3in lift of the car and storage facility which represents half of the growth capital investment for 20 20, in addition to the tsf. We are investing in the construction of a large potential acts of generating or paid cell, which is currently under construction wage. Don't cost approximately twenty million dollars.

In addition to these Investments, we are proud of the water treatment plant expanding our these watering facilities and relocating and overhead power line to allow for the mining of Mills Face Pack, which we go forward by six months from the original mine plan.

Moving on to slide 16 and how physicals and has been a challenging start as we ramp up how however we are feeling much better with how the operation is progressing.

We do still consider how to be a new line with a long line life. We have been ramping it up since it went into operations.

Morning was challenged by the extreme weather events in 2018 by surprise and the recovery was much longer than expected. The US economy has been very strong which has led to an outage and impacted our employee turnover, which we have now stabilized. We have UPS killed the workforce by recruiting from Hard Rock mining States as well. Well, well, well this has been going on. We have been expanding our operations and the process plant which is now operating with throughput rates that are 50% higher than the nameplate capacity. We have the right leadership team in place to drive further improvements and Advance the continued expansion of the operations.

actually

Can we expect continued Improvement for the operation particularly on the mining front where productivity significantly improved over the course of life of of year last year and expect to Thursday improve as issue progresses, even it costs are also expected to decrease as well.

moving on to slide 17 and The Craze

Christ continues to be demonic keeps on giving with consistent positive performance and cash flows. There is plenty of opportunity to convert the large resource base to reserves and extension online for a lot of capital investment.

Ford 2020 the price is expected to produce a similar amount of gold to 2019 while costs.