Q4 2022 OceanaGold Corp Earnings Call
Speaker 2: Good morning and afternoon ladies and gentlemen and welcome to the Oceana Gold 2020 to fourth quarter results webcast and conference call.
Speaker 2: At this time, all participant lines are in a listen-only mode, but following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also, note that the call is being recorded Tuesday, February 21st at 10 a.m. Eastern Time.
Speaker 2: And I would like to turn the conference over to Brian Martin. Please go ahead. Good morning. Welcome to Oceana Gold's fourth quarter and year-end 2022 results webcast and conference call.
Speaker 3: I'm Brian Martin, Senior Vice President of Business Development and Investor Relations.
Speaker 3: We're joined today by Jared Baum, Oceana Gold's President and CEO , Scott McQueen, Chief Financial Officer, David Londogno, Chief Operating Officer, Americas, Peter Sharp, Chief Operating Officer, Asia Pacific, Scott Sullivan, Chief Technical and Projects Officer, and Kerig Fiebre, Executive Vice President, Exploration.
Speaker 3: We will be referring to a presentation during the conference call that is available through the webcast and on our website.
Speaker 3: I would also like to remind everyone that our presentation will be followed by a Q&A session.
Speaker 3: After moving, we'll be making forward-looking statements during the call. Please refer to the cautionary notes included in the presentation, news release, and MDNA as well as the risk factors set out in your annual information form.
Speaker 3: All the dollar amounts mentioned in this conference call are US dollars, unless otherwise noted.
Speaker 3: I'll now turn the call over to Jared Bond for opening remarks.
Speaker 4: Thank you Brian . Good morning everyone and thank you for joining us today.
Speaker 4: 2022 was a successful year for Oceania Gold, one that was marked with many accomplishments.
Speaker 4: This first slide, this how we wins, became each of the five pillars of our corporate strategy.
Speaker 4: People are only stable, I said, and they're safety in the central. So I'm very happy that 2022 was the safest year on record for the company.
Speaker 4: Total recordable injury frequency rate of 2.3 per million hours worked.
Speaker 4: This low injury rate reflects the care our people are taking in their daily work, both themselves and each other.
Speaker 4: as well as the effectiveness of our safety leadership programs.
Speaker 4: It's a great outcome but we're not complacent and we remain ever vigilant in keeping our people safe.
Speaker 4: It's also great to be able to say that we delivered on 2022 guidance.
Speaker 4: This was driven by the DPO successfully achieving its full target mining and processing rates ahead of schedule.
Speaker 4: hail delivering another strong year, speaking its increased production guidance.
Speaker 4: In New Zealand we had a challenging first half year at YHEE but we had a stronger second half and a guiding to improved performance in 2023.
Speaker 4: At Macraes we had some weather-related downtime mid-year but rebounded with a very strong fourth quarter result.
Speaker 4: Despite their challenges in 2022, it's worth pointing out that both New Zealand operations combined produced 25,000 ampers or 16% more than they did in the prior year.
Speaker 4: The second pillar on this slide is about making sure we have the right culture for us to deliver on our potential and we've made some important steps forward here.
Speaker 4: with a revised company vision of values and to measure all improvement in employee turnover and creative relations.
Speaker 4: There have also been some excellent additions to our management team which I'll talk about a little later in the presentation.
Speaker 4: From a growth perspective we successfully progressed our organic growth projects.
Speaker 4: At HAIL we are now fully permitted for the expansion and the teams are well on the way of the underground development and paid self-instruction.
Speaker 5: The bid will cover this line on the call.
Speaker 4: We also released some exciting exploration results in December highlighting the fabulous near-line potential we have at Hailes, the DPO and Ferra Caraponga which Craig will talk about in more detail later.
Speaker 4: From a financial perspective, we had a very good 2022.
Speaker 4: EBITDA was $382 million, 16% higher year on year despite both gold and copper prices being lower year on year.
Speaker 4: We were able to progress our growth options and still generate a meaningful free cashflow.
Speaker 4: which allowed us to further strengthen our balance sheet with a $68 million reduction in net debt over the year.
Speaker 4: This stronger balance sheet underpins our ability to grow the business by executing on our organic growth options.
Speaker 4: And we'll share with you today how we sit that plane out over the next three years.
Speaker 4: Our three-year outlook is once again a compelling story of near-term production growth.
Speaker 4: reducing all the sustaining cost per ounce and free cash flow generation of potential.
Speaker 4: This strong operational and financial performance in 2022.
Speaker 4: Together with the confidence we have in our ad book, I'm depending on the board's decision to raise that company's dividend policy.
Speaker 4: We have declared a one-centre share semi-annual demand to be paid in the second quarter, showing our commitment to provide returns to shareholders.
Speaker 4: And from a market rating perspective, we affected a number of tactical changes which have improved senior management proximity to address it and concentrated our register in North America.
Speaker 4: All that you see on this slide is in service of our objective of increasing and sustaining the higher value of Oceania Gold. Share price depreciation enjoyed by shareholders in 2022 was a pleasing reflection of this strategy being executed.
Speaker 4: Moving on to our three year outlook.
Speaker 4: We project a production growth rate of 9% per annum over the next three years which gets up to over 600,000 ounces of gold by 2025.
Speaker 4: In addition, we have a projected decline in both unit costs and capital spending over three years.
Speaker 4: I look for primary growth engine, though why needs production growth is also protected to contribute very much.
Speaker 4: Sourcing high grey ore from the underground and lowering material handling at hail is a key driver of the unit cost reduction over the next three years.
Speaker 4: In 2023 we expect to produce between 460 to 510,000 ounces of gold at an all-insustaining cost of 1,425 to 1,525 per ounce.
Speaker 4: The guidance for 2023 has been impacted by the very recent identification of an e-book promoting maintenance on one of the boronals at Macrae's which unfortunately has decreased 2023 guidance by around 15,000oz from what it would have otherwise been.
Speaker 4: Peter Sharp, who I'm pleased to have on today's call, is our relatively new Chief Operating Officer today, who will talk more about this later.
Speaker 4: By 2025 we're projecting our own sustaining costs to be between $1,100 and $1,250 per ounce in line with the increase in production profile and the projected reduction in sustaining capital.
Speaker 4: Growth capital expenditures are also expected to decrease at the next three years, as expenditure on high-line ground-level sales expansion winds down.
Speaker 4: Together with higher gold production at a lower unit cost, this should in turn lead to significant free cash flow generation at current gold prices over our three year outlook period.
Speaker 4: I'm on my move on to our 2022 video results and have a bit of a low view of the board.
Speaker 4: As mentioned, our total recordable injury frequency rate was an industry-leading 2.3 million hours of work and a record load for the company.
Speaker 4: We produced a little over 472,000 ounces of gold at an all-in-sustaining cost of $1,407 dollars per ounce.
Speaker 4: We can both have full year production and revised top-scarred instrument.
Speaker 4: Our adjusted EPS was 21 cents per share. We generated $58 million for free cash flows and that's calculated after repaying the principal and financial exit.
Speaker 4: and we reduced our net debt by $68 million.
Speaker 4: In summary, it's a great result and a reflection of the hard work put in by everyone at Oceanaunder Professional Wheeler whoran with the program.
Speaker 4: I'll now hand the call over to Scott McQueen, our Chief Financial Officer, to provide an overview of our financial highlights and the 2023 guidance.
Speaker 4: Thank you Jared and good morning everyone.
Speaker 4: As you can see from the bar graph on this slide, it is clear our business is trending in the right direction.
Speaker 4: with year-on-year increases in revenue, EBITDA and profitability.
Speaker 4: It included record full year revenue of $967 million in 2022, which was a 30% increase relative to the prior year.
Speaker 4: Pleasingly, the record revenue reflects underlying operational performance with higher production and sales to driver are higher gold prices.
Speaker 4: With the 2022 average goal process, you see slightly lower than the previous year.
Speaker 4: The underlying increase in production in sales came mainly from a full year of operations at the DIPUER.
Speaker 4: a higher contribution from the New Zealand operation.
Speaker 4: All squatter revenue was also stronger at 14% on the comparative quarter of 2021.
Speaker 4: The increase is mainly due to higher revenue from the DiPIO following the restart of production in November 2021.
Speaker 4: Full year EBITDA of $382 million, 16% above the prior year, driven by higher sales and revenue.
Speaker 4: partially offset by the increase in cost of sales which again was mainly attributable to the full year of operations at the DPO in 2022.
Speaker 4: The VDAR of 109 million in the fourth quarter is also a significant increase compared to the prior quarter and the corresponding period in 2021.
Speaker 4: The increase relative to the previous quarter mainly due to higher sales volumes, combined with a lower cost of sales and unrealised foreign exchange gains.
Speaker 4: Just the net profit for the year was $148 million.
Speaker 4: including $29.9 million in the fourth quarter.
Speaker 4: Disacquated to earnings per share of 21 cents for the full year and four cents for the fourth quarter. Both of which were above endless consensus estimates of 18 cents and one cents respectively.
Speaker 4: The company generated $58 million in free cash flow in 2022.
Speaker 4: 3 million of which was in the fourth quarter.
Speaker 4: This, despite weather precluding the delivery and sale, is just over 4,600oz of gold dore and TPO during the final week of the year.
Speaker 4: 2022 free cash flow was calculated after deducting finance lease principal repayment.
Speaker 4: Going forward, we're going to express free cash flow on a pre-lease principal repayment basis.
Speaker 4: This is more consistent with how others calculate free cash flow and aligns our inclusion of all finance lease liabilities in our net tip figures.
Speaker 4: We applied this updated calculation methodology to free cash flow in 2022.
Speaker 4: free cash flow would have been just under
Speaker 4: Our improved financial performance in 2022 has enabled the company to reduce net debt, inclusive of finance leases, by 29% to $117 million at year end.
Speaker 4: This decreased the company's leverage ratio by 38% with 0.45.
Speaker 4: During the year, we repayed $100 million against the company's $250 million revolving credit facility.
Speaker 4: 50 million of which was repaid during the fourth quarter.
Speaker 4: I've got the 31st of December 2022.
Speaker 4: The company had an immediately available liquidity of 183 million, including 83 million in cash.
Speaker 4: and the 100 million undrawn in the company's revolving credit facilities.
Speaker 4: Moving on to our 2023 guidance.
Speaker 4: On a Consulovative basis, we expect to produce between 460,510,000 ounces of gold and 12,000 to 14,000 tonnes of copper at an oil and sustaining cost of 1,425 to 1,525 dollars per hour.
Speaker 4: While production is expected to increase on 2022 levels.
Speaker 4: 2023 guidance has been impacted by the recently identified fall mill issue at Macraes, mentioned by Gerard. Peter will also cover that in more detail later in the call.
Speaker 4: The production is expected to be variable over the course of 2023 and weighted more to the first half of the year.
Speaker 4: It is driven mainly by the grade profile at Hale.
Speaker 4: 2023 cost guidance is slightly higher than 2022.
Speaker 4: reflecting in.
Speaker 4: inflationary pressures across the industry which feed into the full years of cost saving.
Speaker 4: as well as the effect on production of the Macrae's Bournville Wishes.
Speaker 4: This year, hail is expected to produce between 170,000 and 185,000 ounces of gold.
Speaker 4: Well, all in sustaining cost guidance remained flat year on year at $1500 to $1600 for an hour.
Speaker 4: As previously noted, the hail production profile is expected to be more strongly first half-weighted.
Speaker 4: The mining continues in the higher grade northern.
Speaker 4: which is scheduled for completion around mid-year.
Speaker 4: at the DPM.
Speaker 4: Production is expected to improve relative to 2022.
Speaker 4: There's 2023 guidance of between 120,000 and 130,000 ounces of gold, 12,000 to 14,000 tons of copper.
Speaker 4: An all-interstanding cost expected to range between $750 and $750.
Speaker 4: $850 per ounce.
Speaker 4: GPO's gold and copper production is expected to be relatively evenly weighted throughout the year.
Speaker 4: Cost increase year on year is primarily a result of higher sustaining capital and grid supplied energy costs as well as the effective inflation.
Speaker 4: After allowing for the ball mill impact on processing capacity, the craze is expected.
Speaker 4: that reduce between 120,000 and 135,000 ounces of gold, as it all ends the same in cost of between 1,625 and 1,725 dollars for each.
Speaker 4: Finally at W demonstrate,
Speaker 4: to continue the improvement in 2023.
Speaker 4: Destruction expected to be between 50,000 and 60,000 ounces of gold at an all-insustaining cost of $1,400 to $1,500 per ounce.
Speaker 4: The production profile is expected to be second half weighted as mining transitions to higher grade material combined with an increase in ore terms mined and milled.
Speaker 4: Total Group Capital Investments are expected to range between $305 and $350 million.
Speaker 4: with approximately 50% of that attributable to capitalised mining costs. The majority of our 2023 growth capital relates to the development of the Hale underground mine. The permitting process is now complete and development in full swing.
Speaker 4: We also expect to spend between $25 and $35 million on exploration in 2023.
Speaker 4: Majority directed to expanding underground resources that are a cure for pung and brightly.
Speaker 4: directed to expanding underground resources at Barakira Pongani Waihi and Atayao.
Speaker 4: This, in conjunction with our three-year outlook, has given the Board confidence to reinstate the company's semi-annual dividend policy with a first dividend of $0.01, a share payable in April received.
Speaker 4: We'll now turn the call over to David Londogno to provide more information on high-elves performance.
Speaker 6: Thank you, Scott, and good morning, everyone.
Speaker 6: They exceeded its increaseable year production guidelines for a second year in a row, delivering a 522 gold production of 176,222 ounces.
Speaker 6: More importantly, we achieved this by decreasing our injury frequency rate by 33% year-over-year to 1.8 at the end of 2022.
Speaker 6: Gold production in 2022 benefits it from positive tonage and greater conciliation in the Phase 1 of the HATE-DIT leading to the over-performance selected to guidance granges.
Speaker 6: Forequarter goal production of 41,533 ounces was better than the previous quarter as expected, primarily from higher-did-grace mine and processed coming from the meal zone pit.
Speaker 6: On the mining side, we continue to focus on optimizing the mine plan that was designed as part of the HAIL technical review.
Speaker 6: Total material mined into 4.25 was 10.2 million tons better than the previous quarter due to improved shovel productivity resulting from double side loading implemented in less better which has translated into better mining fleet productivity and utilization.
Speaker 6: Total over-mining 2022 was 4 million tons, higher than the same period in 2021, and this was a result of mine sequencing and positive over-turns reconciliation in phase 1 pit.
Speaker 6: Total meal feed was 11 percent higher year over year, largely reflecting improvements in the processing plant related to crusher and meal performance and improved recoveries as well as continued focus on effective blast fragmentation.
Speaker 6: Four-quarters of a new feed of approximately 836,000 tons was lowered from previous quarter, caused by five and a half days of lost processing time due to the freezing event that occurred during the last week of the year in the eastern United States.
Speaker 6: The operation continues to sustain increased throughput rates from blast fermentation, improvements and more effective blends.
Speaker 6: K-NOS performed its full year all-insustaining guidance, achieving $1,425 per ounce. However, year-over-year all-insustaining costs did increase due to lower sales, combined with higher operating costs.
Speaker 6: mostly due to inflation driven increase in consumables.
Speaker 6: Looking ahead to 2023, ale is expected to produce between 170 and 185,000 ounces.
Speaker 6: While cost guidance will remain flat relative to last year, with all in sustaining costs expected to be between $1500 and $1600 per ounce.
Speaker 6: HAIL, we also anticipate a smoother production and cost profiling 2024 and 2025 relative to the 2022 HAIL technical review where production levels varied significantly over this period.
Speaker 6: Talking about the Hale Expansion, I am very pleased to provide everyone with an update on the project.
Speaker 6: At the end of 2022, we received all the necessary permits and approvals to complete the HAIL expansion.
Speaker 6: With all this in hand, we can now fully develop the underground mine and expand the operating footprint to allow additional waste containment facilities and expand the tailing storage capacity.
Speaker 6: To date, we have developed a total of 950 meters, of which 400 are on the production decline and a combined 550 meters on the two ventilation portals.
Speaker 6: We continue to safely progress the work and first order from hailing the ground donation track for delivery in the fourth quarter of 2023.
Speaker 6: Construction in the 541 pond and West Pack Stage 1 continues through January .
Speaker 6: Multiple contractors mobilized the site and began progressing on multiple scopes of work, including clearing, grabbing, adverts, and groundwater pipe installation.
Speaker 6: I'm also pleased to say that we're hosting an analyst and investor tour at HAIL next week where I'm very much looking forward to showcasing the great work that is being done by the HAIL team.
Speaker 6: I will now turn the call over to Peter Scharke to discuss the DPO and our New Zealand assets.
Speaker 7: Thank you, David.
Speaker 4: In 2022, our DPO operation reported 0.74 recordable injuries per million hours worked.
Speaker 4: record best at this operation.
Speaker 4: The DPO reached its full target mining and milling rates ahead of schedule in the second quarter of 2022 and met its full year guidance by producing 113,198 oz of gold for the year, including 29,104 oz in the fourth quarter.
Speaker 4: 4,8 copper production was 14,361 tons, including 3,476 tons in the 4th quarter.
Speaker 4: Total material mine for the full year was 1.7 million tonnes, including 404,000 tonnes from the fourth quarter.
Speaker 4: Mill feed for the year was 4 million tons, a significant increase relative to 2021, following the restart of the mill late in the fourth quarter of 2021.
Speaker 4: Mill Figre was 1 gram of Tung of Gold and
Speaker 8: slightly higher than in the previous quarter and consistent with the variation in the underground mine grade per the mine plan.
Speaker 8: Mill feed composition for the fourth quarter was approximately 37% of underground ore and 63% from surface ore
Speaker 8: The DPO continues to generate strong margins with an all-in sustaining cost for the year of $637 per ounce and $1061 per ounce in the fourth quarter.
Speaker 8: Notably a 4600 ounce dore shipment planned for sale in December 2022 was not able to be completed due to weather which resulted in lower sales and higher
Speaker 8: Now this shipment has now been sold.
Speaker 8: Last year we received the permit required to increase our processing rates to 4.3 million tonnes per annum and we are currently investigating how to optimally use this additional capacity.
Speaker 8: Our preferred option is to increase the underground mining rates to 2 million tonnes or more per annum and an optimisation review is currently underway
Speaker 8: Results from this review are expected in
Speaker 8: At the DPO, we are also making significant progress with our external stakeholders, as we continue to improve our relationships with key government and community groups.
Speaker 8: A key initiative completed last year was the relocation of our principal office to the DPO line.
Speaker 8: which will result in all of the local business taxes, which is approximately $6 million per annum, flowing to local governments and communities in 2 days of 23.
Speaker 8: Under our renewed financial or technical assistant agreement, our FTAA, we have also implemented two new streams of
Speaker 8: namely the Community Development Fund and the Provincial Development Fund.
Speaker 8: The Community Development Fund is the first of its kind in the Philippines.
Speaker 8: This fund was created to expand the number of neighbouring communities that received development funding from the mine and is governed by a steering committee comprising company and community representatives.
Speaker 8: These people evaluate the proposed projects and ensure that they are delivered in line with the community's development goals.
Speaker 8: Importantly, all of the costs associated with the Community Development Fund and the Provincial Development Fund programs are included in our guidance figures for the DPO.
Speaker 8: Now for an update on our New Zealand operations.
Speaker 8: Macrae significantly improved its safety record last year with its injury frequency rate decreasing by 35% compared to the previous year down to 5.2 recordable injuries per million hours
Speaker 8: The operation finished strong producing 39,815 ounces of gold in the fourth quarter.
Speaker 8: Annual Gold production was 143, 672 ounces for 2022, 10% higher than the previous year, primarily due to higher tonnes of milk and higher tonnes of mine from both the open cut and the underground operations.
Speaker 8: Total material mined in the fourth quarter was 12.5 million tonnes, an increase from the previous quarter when mined tonnage was impacted by record rainfall that occurred in July .
Speaker 8: The development rates of the recently established Golden Point Underground continued to improve throughout the quarter and the first stop, All Times Mind, were in December .
Speaker 8: The operation at Golden Point Underground is expected to reach full capacity during the second quarter of 2023, while Fraser's Underground mine is expected to complete operations at the same time.
Speaker 8: As with the Divio, an optimisation review is currently underway at Macrazie to increase underground mining rates, with results from this review also expected in 2023.
Speaker 8: For the full year, MacRae's recorded an all-in sustaining cost of $1,510 per ounce, a good result given the weather-related challenges which occurred mid-year.
Speaker 8: As Gerard previously mentioned, production guidance at McRae's for 2023 was impacted by approximately 15,000 ounces due to the discovery of a crack in the feed-in trunnion in one of our two bore
Speaker 8: which was identified during a total plant shutdown last week.
Speaker 8: The McRae's team is working to develop the optimal recovery plan to reinstate the mill back into full operations.
Speaker 8: Continuity plans have been developed and some are in the process to minimise overall impact on production, including processing of high grade ore in the short term to offset the reduced mill feed rate.
Speaker 9: Now for our Wahi operation.
Speaker 8: Why he also significantly improved its safety record last year, with its injury frequency rate decreasing by 50% compared to the previous year down to 3.1 recorded injuries per million hours worked.
Speaker 8: Production also significantly improved in the second half of the year, due predominantly to improved confidence in the underground resource model, which allowed for more accurate planning and adherence to planning.
Speaker 8: Why he met its revised guidance and produced 39,109 ounces of gold in 2022, including 10,466 ounces in the fourth quarter.
Speaker 8: While production decreased relative to plan in the fourth quarter, this was predominantly attributed to slower mining in remnant mining areas during October , plus an unplanned bill outage during the same month.
Speaker 8: Importantly, the poor performance during October was not related to the reconciliation challenges that occurred in the first half of the year.
Speaker 8: With the benefit of the Grade Control Drilling Program being approximately 18 months ahead of mining, it is expected that the mining performance and reconciliation accuracy will continue to improve in 2023 and beyond.
Speaker 8: As with the DPO Enma Cray's, an optimisation review is currently underway at Wahi to increase underground mining rates, with results from this review also expected in 2023.
Speaker 8: Why his full year all in sustaining cost was $2,174 per ounce, while fourth quarter all in sustaining cost was $2,035 per ounce.
Speaker 8: Looking ahead to 2023, why he's expected to see materially improved performance with guidance between 50 to 60 thousand ounces at an all-in sustaining cost of between 1400 and 1500 dollars per ounce.
Speaker 8: Waihe as it has experienced abnormally high rainfall since the beginning of 2023.
Speaker 8: with over 850 millimeters of rain in January , followed by over 250 millimeters of rain in the first two weeks of February .
Speaker 8: This has impacted productivity in the underground mine, especially in the remnant mining areas of Edwards and Empire West.
Speaker 8: However, on the expectation that rainfall will moderate, the company expects any first quarter production impacts to be recovered across the balance of 2023.
Speaker 8: I will now turn the call over to Scott Sullivan to talk about progress and fairer curaponder.
Speaker 10: Thank you, Peter. Good morning, everyone.
Speaker 10: Last year we took the important step of lodging the consent applications or permits with the two local councils.
Speaker 10: The Council has formally accepted our application as complete for processing and issued a number of requests for additional information as is normal process which we will respond to ahead of public consultation this year.
Speaker 10: At the completion of the consultation stage, the Councillors will determine the formal hearing process for considering the consent application.
Speaker 10: Target-indicated resource size of 1.1 million ounces has been determined as optimal for the initial development plan, which provide improved mind-design opportunities in support of a pre-visibility study.
Speaker 10: Due to slower than expected drilling at Fari Kiropunga in 2022 related to drought conditions, the company is now targeting to release an NI 43.1 compliant PFS in the first half of 2024. On current schedules we're expecting first store from Fari Kiropunga in late 2031 with the president expect to release a 1994isan payment of 1.9 million topic dates and spades in every celebrating in the company Bo!!
Speaker 4: on creating value through Nearmind
Speaker 4: The Parakiraponga outstanding drill intercepts continued as reported in December and shown in the slide including 73 grams per tonne gold over 12.9 metres.
Speaker 4: Drill meters were down however, hindered by poor weather conditions and the prioritisation of hydrogeological drilling.
Speaker 4: This year our drilling at Fireacura Ponga continues to focus on resource conversion with two rigs and 8,800 meters planned.
Speaker 4: Also at Martha Underground, three rigs are currently drilling with 5000m forecast for Q1, contributing to both resource conversion and growth.
Speaker 4: The tail, our focus in 2022, was the Palomino Underground Target, where we drilled nearly 10,000 meters in 20 holes, with a focus on converting the remaining inferred resource to indicate it in support of an updated resource estimate and economic study.
Speaker 4: We also had several exceptional results including 6.8 gpt gold over 100m as shown on this section.
Speaker 10: Our goal here is to convert Palomino to reserve in early 2024.
Speaker 4: Exploration expenditure at Hale this year is expected to range between $6 and $8 million with an increased commitment to exploration drilling over previous years focused on resource conversion and replenishing the underground target pi pi.
Speaker 4: At the DIPIO, last year our team was successful in discovering two near-mind mineralised structures adjacent to underground infrastructure, encouraging us this year to commit a further 26,000 metres to infill and extension drilling, phoned up on these and several other priority targets.
Speaker 4: Looking across our exploration pipeline, I'm very pleased we're continuing to invest in our exploration success with a further $25 to $35 million in mark for 2023, with a focus on mainline resource conversion and growth.
Speaker 4: Looking across our exploration pipeline, I'm very pleased we're continuing to invest in our exploration success with a further $25 to $35 million in mark for 2023, with a focus on near-mine resource conversion and growth. I'll now turn the call back to Jared.
Speaker 4: Thanks Craig and thanks team. In addition to announcing strong production and financial results, I wanted to take the opportunity to let you know we've also significantly strengthened our management team recently.
Speaker 4: Today I'm pleased to advise that Michelle Duplessis will join us as Chief People and Technology Officer on 1 March, a little over a week away.
Speaker 8: Michelle has over 25 years of experience in new resources, transformation and executive leadership across multiple industries and countries.
Speaker 4: She joined us from BHP where over her 15 years there she had the newest operational and strategic role.
Speaker 4: led to cross-functional improvements in transformation function and most recently led global HR operations.
Speaker 4: As previously announced, Megan Suzie joins us as Chief Sustainable of the Office in December last year. We are the highlights for the executive in this area, brings to the role, particularly to the social performance, human rights, climate change, environment and a range of stakeholder engagement functions on large and complex projects.
Speaker 4: in the resources and construction sector. And today you heard from Peter Sharp for the first time. He joined us as Chief Operating Officer for the Asia-Pacific in October of last year.
Speaker 4: The Ocean Underdoll has a stronger executive team and has also made a number of key appointments at other levels across the organisation.
Speaker 4: This all gives me confidence that we can drive the full-value potential of this business.
Speaker 4: with the target culture throughout the organization.
Speaker 4: While we're proud of our 2022 accomplishments there's still plenty of improvement opportunities and much work to be done.
Speaker 4: Our focus is on safe and responsible delivery and execution this year and beyond. Maximising the free cash flow generation in the business and improving shareholder returns.
Speaker 4: Our three year outlook represents an annual production growth rate of 9% per annum to over 600,000 ounces of gold in 2025.
Speaker 4: with an anticipated improvement in margins and declining capital spending leading to a significant increase in projected free cash flow in that period.
Speaker 4: This growth is near mine, low risk and organic, with the highly-spantered on track to do the rest of the significant increase in goal production over the next three years.
Speaker 4: We'll also continue to invest in exciting exploration opportunities we have across the portfolio.
Speaker 4: with a focus on the near-line, higher return targets at the DPO hail and Pericure upon where we see tremendous upsides.
Speaker 4: I'll now hand the call back to the operator and open up the line to take any questions.
Speaker 2: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will then hear a three-tone prompt acknowledging your request. And if you wish to withdraw from the question queue, please press star followed by two. And if using a speakerphone, we ask that you please lift the handset before pressing any keys.
Speaker 2: Please go ahead and press star one now if you do have any questions.
Speaker 2: And your first question will be from Oveis Habib at Scotiabank. Please go ahead.
Speaker 11: Thanks, operator. Congrats, Gerard and the Ushana Gold team on the Q4 beat and meeting the full year guidance. Gerard, just a couple of questions for me. Just starting off, the first one as regards to the three year guidance.
Speaker 11: Can you point to any risk and also any sort of areas that you have added conservatism to this guidance?
Speaker 4: Thanks for the question. Look, I mean there's always performance risk across any gold mine but I think we view it as balanced from a risk perspective. We do have programs in place to drive improved performance across the portfolio and I've spoken about those before.
Speaker 4: We have some signature programs in asset management, procurement and continuous improvement, all of which we will be implementing or are in the process of implementing to drive better production and cost outcomes than are in the outlook numbers. But that only remains to be captured.
Speaker 4: So we view it as a very credible, realistic...
Speaker 4: profile of what we can achieve and obviously our job is to beat it.
Speaker 11: Perfect. And just in regards to the 2023 guidance that production is weighted more strongly to the first half of the year, should we also assume GAPEX is also weighted towards the first half of the year as well?
Speaker 4: I'm not that Scott McQueen handle the CAPX question because that's a hate to deny the opportunity to answer a question. But yeah, the first half is slightly weighted to be more production, heavy as a result of basically high or great presentation.
Speaker 4: Scott, do you want to answer the CAPEX profile question?
Speaker 4: Well thanks, good morning. It is actually slightly first half-weighted mainly with some carryover from from 2023 with the delay in the SEIS at inhale but not hugely.
Speaker 9: And we'll see the production profile.
Speaker 11: Thanks for that. My final question is for David. At HAIL, now you've completed, I remember hearing about 400 meters at the production decline. Any negative or positive surprises, David, that you've seen as the decline continues to progress? Well, I don't believe this was a incident that occurred a hundred feet eight in 2000 Glass Kite 3 months after this. It happened just two or three times now. But it also made a difference.
Speaker 6: Hi good morning, holy crap
Speaker 6: No, I think we found a little bit more stuff to material at the beginning of the portal and probably more water than expected. And that was a result of heavy rains during the month of January and the end of the month.
Speaker 6: late in the year. But other than that we're getting, you know, that was from the first 200 meters. After that the material is turning back to what we were expecting.
Speaker 11: Okay, thanks for that David. That's for me Gerard. Again, thanks for taking my questions.
Speaker 12: Thanks, bye bye.
Speaker 2: Thank you. Next question will be from Cosmos 2 at CIBC. Please go ahead.
Speaker 13: Thanks, Jared and team, and thanks for a very good presentation here. Maybe my first question is in New Zealand. As you talk about McRae's, there's the crack in the trunnion. Just wondering, where are you at this point in time? Does it need to be replaced? And if it needs to be replaced, what are the supply chains?
Speaker 13: How do they look like in New Zealand?
Speaker 13: And then the other part is, just to confirm, it sounds like you have two bond mills, one bond mill is impacted. So I would imagine you're still processing ore at this point in time. What's the throughput at this point in time compared to run rate?
Speaker 4: Thanks, Cosmos. I'll let Peter answer the question as it relates to the crack in the milling rate. Just a reminder that the impact we have in relation to this is 15,000 ounces from what it might have otherwise been. And I think as Peter said in his prepared remarks that—
Speaker 4: Now we do see the ability to use the remainder of the demand and the ordering of the feed grade to minimise the impact. So Pete do you want to talk about the questions, address the questions that Cosmos has?
Speaker 8: Sure, thanks Jared and thanks for the question Cosmos. So the crack that was picked up was in... Hi. The crack that was identified during the full plant shutdown was in the feed end of the trunnion of the bore mill as we talked about. It's a full cast feed end so the
Speaker 8: and what we are looking at doing is ultimately the final fix will be to cut that trunnion off and actually bolt on a replacement trunnion, which is something that is quite common in those bore mills. So we're getting serious engineering support out of
Speaker 8: out of Australia but we are looking to your point around the supply issues. We are looking if we can to get as much support from in New Zealand itself from engineering firms with the backup support from Hopkins who are the technical experts.
Speaker 8: So, we, well, we have a quarter.
Speaker 8: think a reasonable handle now on the actual methodology for repair. It's still obviously going through full review so that's why at this stage the estimate of impact is around 15,000 ounces.
Speaker 8: I think the second question was what is the overall impact. So for Macraes yes there's two ball mills and there's two sag mills. At full operation they've run at around 730 ton per hour. We've been
Speaker 8: some of the feed pipe work so that we can run the remaining three mils as one sag and two more mils and we're impacted by around 200 times throughout. One of the positive things whenever the crisis there is a mixture of different grades of all or quite great from the underground.
I mean, a margin impact as well.
Great. Thanks for detailed at very detailed answer.
Switching gears to y E.
As you talked about.
2022 was good it sounds like.
Okay, but in 2023 is going to continue to improve from 39000 ounces last year to 45 to 55000 ounces in 2023.
Two parts I guess Q1 2023 impacted by rainfall.
I seem to recall that was also an issue in Q1 2022.
Have you learned is there anything that we can do about.
Heavy rainfall have you done anything else this year compared to last year and then the second part is.
Yes, it's improving year over year.
But is the 45 to 55000 ounces sort of steady state can we is that now sort of spin I seem to recall that previously.
It got as high as 70 to 80000 ounces I'm just wondering if.
<unk> 45 to 55000 ounces.
Where we should settle but it doesn't sound like it because I think previously you talked about some optimization studies that you also have in place are wahid. So if you can.
Address all those questions that would be great.
Sure Jeremy do you want me to just ask Jordan later, thank you.
Thank you. So so firstly the guidance for 2003 is 50 to 60000 answers.
So just just to be clear on that.
Okay.
Yes.
The rainfall.
One one meters Orion in six weeks is highly unusual.
I don't think any anymore.
Underground or open.
He is not going to be affected long at that point do you, Brian you might have seen that sorry Gabriel.
Impacted the north all of New Zealand.
Over a week ago.
All of the data last week at <unk>.
Sales just very impressed with how actually it was managed from surface runoff perspective, and underground water perspective. So.
I think the team has certainly done a great job learning from from street around that.
There is an open cut that sits directly about the underground.
And what it does feed from the open cut into the Undergrounds, but we are still looking at ways of minimizing that water getting into the underground so.
All future Ryan can be mitigated, but I will say that.
Work that's been done.
It looks it doesn't look rather just had $1 one radius of right in the last six weeks.
Okay.
Just because there was there any other questions.
Yes, you are asking yes, Peter in terms of like as you said thanks for correcting me on the production I was looking at Capex, but is that a good run rate in terms of what you're guiding to in terms of 2023 is that can I just take my spreadsheet.
Quarter, two 2023 for the rest of the time or.
You are you looking for higher production.
Sure. So the interesting thing about why he is.
The average mining rate is around 1 million tonnes per annum and that's what is currently in the forecast, but what we see over time is that the percentage of oil versus the percentage of white of life's 2000, Chris. So in 2023, we've got about a 50 50 blend of auto order waste.
Which means that there is just under 500000 tonnes of ore milled, but in the future use the result, more ore mines in west. So we do see an uplift in production at Hawaii in in the next couple of years and that's part of your three year guidance, but predominantly it's it's about that.
<unk> ratio or twice as opposed to an overall uplift in the underground mining performance, but what we are doing as I mentioned at all of our three operations in Asia Pacific is undertaking assessment, how do we actually lift overall production.
For why he especially will automatically turn into more tonnes milled.
Right.
Great.
Maybe one final question and maybe back to Jerry I don't want to deny yields a very good opportunity to answer your questions Jared.
Your dividend.
It's great to see that you've now reinstated the dividend.
It works out if my math is correct.
So about 8% dividend yield.
What's your longer term thinking in terms of dividend is there a target that you're trying to get to.
How should we think about that.
Yeah. Thanks Cosmos.
We're equally philosophy back to paying dividend.
I would say that early in my tenure, we have real businesses pay dividend so that we have.
Back to the position of being able to do so.
We think that by putting a dividend out there.
Shareholders under the Cuba.
The cash that's generated by the business.
For now.
Short period of time I mean, we've got so much growth ahead of us.
So I think that people will be should be happy to see dividend, but we don't have a target per se beyond the dividend policy as it stands.
Every avenue open to us in the future as we progress.
Production growth and cost reduction that we put out today too.
To either increase it or move share buybacks affect other forms of capital return.
I want to make it clear that we're very aimed to improve and increase returns to shareholders.
The dividend policy is one cent per share semi annually and thats.
That's it for now.
Scott as you were saying, but thats changed at those.
Those cash flows and jewelry.
Great. Thanks, again for answering my questions and we look forward to the remainder of 2023.
Thanks Cosmos.
Next question will be from Wayne Lam at RBC. Please go ahead.
Yes, thanks, guys.
Just wondering for the <unk>.
Costello cost outlook.
It looks pretty good over the next few years, especially into 'twenty 'twenty five just.
Just wondering if that $300 an ounce improvement in ASIC into 25 includes any model tail off in inflation at the other mines or what's kind of driving that improvement in cost profile outside of the Haile underground.
Yes.
First as part of the Haile underground will head on against the primary driver of it right. So.
And then obviously it why he left you'll be getting a lot of leverage there too.
NII is seen in the 2000.
This year.
Naturally as we lift to the target.
Next year, and then beyond that as Peter said.
It's a good deal of leverage.
And is the primary driver.
But volume metrically and also from a cost effective and why he from.
Hello.
Scott Mclean.
Answer that as well, we're not predicting any beyond what you've seen in forward curve for any material input cost with.
Energy.
Steel materials garnered millions of luck.
Now.
Our cost base, we do have a full year of the inflationary impacts this year say half year Ebit's gone.
We're not we're not banking in.
Further increases inflation beyond that what you would see in periods of any very important of course.
You bet.
That's correct.
Eric assumptions.
Any.
The step down in cost and as Darren mentioned earlier, our strategic pillars include.
The effect is on procurement continuous improvement in asset management, and as you mentioned earlier that as opportunity that yet baked into the plan.
Sir.
It's a pretty favorable outcome hopefully we can we can.
Got it.
Okay, great. Thanks, and then maybe on the production outlook is the lower 2024 guidance purely driven by smoothing in the profile at Haile or are there other incremental improvements we should be thinking about like expand capacity at the <unk> ore.
And increase that Mccray's.
And then just in terms of that smooth profile at Haile should we just kind of taking the average of the 'twenty 'twenty four 'twenty five profile around the 210000 ounce level.
That's a little bit.
Why do you mean basically.
We've made it very clear when we put that in the <unk> last year.
Very lumpy 'twenty four 'twenty five.
You see roughly 60000 assets go out of 'twenty Board and 25 is up by about 70.
A couple of things one we stated one of the pits in 'twenty two longer than we expected.
Mine plant transition issues.
Issued.
So we had an opportunity and then there's just lucky and optimization of the mine plan overall.
The technical report remains intact do you just see a shifting of the shape of production in the near term, which is not surprising to anyone looked at what that profile look back a year ago. When we put that report.
Other than that.
While he is.
We will be a step up in 'twenty, one from 'twenty three all other things being equal, but everything else should be around flat.
Okay, great. Thanks, and then maybe just last one that mccray's.
Have you seen any similar impact in terms of rainfall and flooding in the south.
On the three year outlook does that include a relatively flat production profile. There around 130000 ounces or is there a scenario where that mine kind of bounces back into the 150000 ounce range in the future.
I'll, let me take the second half the first half we did just a reminder, in the September quarter.
Paul.
Sure.
Heavily impacted by rain in the month of July we had record rainfall.
In.
In July there so that was an impact just on the multi year Apple.
Okay.
Sure. Thanks, Jared, but just to answer on the January the January February rainfall significantly impacted the north pole and the south all of it.
Yes, it wasn't impacted by it that's about it.
Significant Brian .
Generally speaking the crisis is a relatively flat outlook.
Yes.
<unk>.
A big number increases at this stage as part of four guidance. However, as I said, we are obviously looking at.
Why is of increasing underground production, which obviously is much higher grade than the stockpiles are the IP so any.
We can get out of those optimization reviews and will flow through to higher outlook.
At this stage.
Right.
Okay perfect. That's all for me thanks, guys.
Thanks, Brian .
As a reminder, ladies and gentlemen, if you do have any questions. Please press star followed by one on your Touchtone phone.
And your next question will be from Mike Parkin at National Bank.
Thanks, guys and congrats on a good quarter.
I just wanted to follow up question on what's happening with the ball mill grades.
The 15000 ounce impact is that solely being budgeted based off the reduced throughput or have you budgeted in.
A potential impact on <unk>.
On the replacement of our I.
I guess better clarity are you even running at now or basically.
My question.
Yes, well the not wanting that ball mill now market.
And the 15000 that feedback from the guidance that we put out of 23.
The whole of the measures that pace.
That estimate.
Estimate too.
Our repair or replacement.
And the mitigating effects.
Optimizing the feedback.
And alternative.
Yes.
Yes.
Ball mill three signals operating optimally.
Okay. Thanks, so much.
Thanks, Mike.
Thank you.
And at this time, we have no other questions registered please proceed with closing remarks.
Well look thanks, everyone for joining us on the call that concludes the webcast a replay will be available on the website later today on behalf of the.
The entire management team and every one of those young adults I appreciate you joining us and wish you all a pleasant rest of the day.
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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