Q2 2023 OceanaGold Corporation Earnings Call
Good morning, and afternoon, ladies and gentlemen, and welcome to the Oceana Gold's 2022 weeks second quarter results webcast and conference call. At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
If at any time during this call you require immediate assistance. Please press star zero for the operator.
And I would like to turn the conference over to Rebecca Harris. Please go ahead.
Good morning, and welcome to Oceana Gold's second quarter 2023 results webcast and conference call I'm, Rebecca Harris director of Investor Relations.
We are joined today by Gerri Bond, President and Chief Executive Officer, Marius Van Niekerk, Chief Financial Officer, David Lund, Donyo, Chief operating Officer Americas.
Peter Sharp Chief operating Officer, Asia Pacific and Crazy pretty Chief Exploration Officer also present is Brian Martin Senior Vice President business development and Investor Relations.
The presentation that we will be referencing during this conference call is available through the webcast and on our website I would also like to remind everyone that our presentation will be followed by a Q&A session.
We will be making forward looking statements during the call. Please refer to the cautionary notes included in the presentation news release and MD&A as well as the risk factors set out in our annual information form.
All dollar amounts discussed in this conference call are in U S dollars I will now turn the call over to Jared for opening remarks.
Thank you Rebecca and good morning, everyone. Thank you for joining us today.
I am pleased to say that we delivered a strong second quarter, producing just over 130000 ounces of gold and 3400 tonnes of copper at an all in sustaining cost of $1319 per ounce. This resulted in strong free cash flow generation.
On safety at 12 months leasing average total recordable injury frequency rate of three five per million hours worked increased from the record low achieved in the first quarter.
Whilst this is still a good results in our industry, we're not comfortable with it and we had a number of interventions in the period to ensure that safety was top of mind for Atwood.
Our planned launch of our refreshed safety behavior program occurred during the quarter, which is a key element of our plan to ensure everyone work safely at our Cheyenne adult every single day.
From a production perspective, both of the New Zealand operations rebounded strongly in the second quarter.
The heavy rainfall impacting why he in the first quarter subsided, allowing excess back into the high grade stopes at Martha underground.
At Mccray's the temporary repairs to one of the ball Mills was completed at the end of March, allowing a full quarter of production from all mills and that allowed us to show the potential of a crisis.
The <unk> was a very steady producer quarter on quarter and had a solid quarter, albeit lower than Q1.
Strong production, even stronger sales together with reduced all in sustaining cost drive strong free cash flow generation of $72 million for the quarter.
From a shareholder returns perspective during the second quarter, we paid our previously announced one cent per share semi annual dividend and in the Q2 results we announced the next one cent per share semi annual dividend to be paid in October .
In May we published our 2022 sustainability report, which demonstrates some of the great work, we've been doing in regards to safety the environment and partnerships and in our commitment to integrity high standards of governance and transparency.
Development of the Haile underground remains on schedule with a decline now approaching the third production level and first ore is expected to the mill in Q4 of this year.
As you know the Highlander granted really past our production growth and all in sustaining cost reduction in coming years. So its progress and <unk> first oil is really exciting.
With all that we remain on track to deliver our 2023 production cost and capital guidance set at the start of the year, which we know to be a key expectation of the market.
This slide looks to compare our second quarter and first half outcomes on some key metrics compared with full year guidance.
The Q2 and first half half comes as shown in the circles and the full year guidance ranges as shown by the triangles for each metric.
On production, we produced 248000 ounces of gold and 6900 tonnes of copper in the first half, which is a little over half of the full year production guidance.
Our all in sustaining cost of $1318 per ads for the second quarter resulted in a first half all in sustaining cost of $1429 per ounce, which as you can see is at the low end of the full year guidance range.
And total Capex is on track to be in the midpoint of full year guidance.
Due to a combination of scheduled plant shutdowns mine sequencing and grade profile across the group. We expect this coming quarter, the third quarter to be the lowest production and highest quarter of the 2023 year.
We then expect the fourth quarter to be another strong one.
At constant metal prices, our expectations of free cash flow will broadly followed these profile.
So we're able to confidently reaffirm our 2023 production cost and capital guidance.
Within that the DPA is on track to achieve the upper end of its annual production guidance, while highly is tracking towards the low end of its production guidance.
I'll now hand, the call over to Maurice to provide an overview of our Q2 financial results.
Thank you Jarrod and good morning, everyone.
As Jared mentioned, we had a strong Q2 financial results driven by strong gold sales, which included called in transit at the end of Q1.
Revenue for the quarter was $3 1 million.
93% increase from Q1 and strongest half year revenue Andre.
EBITDA for the quarter was $153 million.
Which is 53% higher than the broad theory.
The quarter benefited from gold sales of 139000 ounces as well as higher realized gold prices compared to the prior quarter.
Net profit after tax of $69 million.
76% higher in the first quarter.
When adjusted for the noncash unrealized foreign exchange loss. This equated to an EPS of <unk> <unk> per share fully diluted.
Pricing cash flow equates to <unk> 20.
<unk> per share fully diluted.
Let's say ahead of analysts' consensus estimates.
We reported free cash flow of $72 million driven by higher sales and increased production. It is a significant improvement from the first quarter and we predict continued cash generation for the second half of the year.
Our financial position continues to strengthen with one and $36 million in net debt and liquidity of $215 million at the end of the quarter.
At a leverage rate of three four times, we have the financial flexibility to continue investing in the exciting growth projects across our business.
The next scheduled rollover periods for the drawn funds on our revolving credit facility is this months at which time, we will consider further discretionary debt repayments.
In closing our strong second quarter financial results reaffirm our guidance for 2023.
I will now turn the call over to Debbie to discuss the Halo operation.
Thank you Marius Hello, everyone.
Second quarter gold production at <unk> was 44000 ounces.
The quarter on quarter reduction was driven by lower than expected rate and countering the lower benches.
On page.
Production from <unk> is expected to be completed in the third quarter and mining.
Turning to the next phase.
Thanks.
Can you sequencing means that the third quarter.
To be the lowest production quarter of the year.
Fourth quarter will benefit from the introduction of <unk>.
Good for him.
The underground ore feed.
Production is now expected to be towards the lower end of the guidance of between 100, and Stephanie and I have got an 85000 ounces of gold.
And all in sustaining costs for the quarter.
<unk> $1351 per household.
All in sustaining costs.
Debate.
At end of the guidance.
<unk> hundred <unk> hundred dollars per ounce.
Production provides from second half of the year.
With the Australian Horseshoe underground rigs focusing on both the control and resource conversion.
We are also continuing to delineate palomino and expect that we'll leave it up pretty interesting study on this project. Thank you. Thank you Paul.
Now regarding the Haile expansion.
We continue to advance development development during the second quarter at the Horseshoe underground.
The decline has now reached <unk> 990 level and is approximately 80 meters on accessing the nice to have any level of the mine, which is the kind of production level.
Development rates average approximately 300 meters per month during the quarter.
We are in the process of preparing the first hour stopes for mining later in the year and have begun the grade control program.
And on track to deliver.
And Neil in the fourth quarter.
Work continues to advance on our surface projects as well with great progress being made at Bolivar West.
And the tailings storage facility expansion.
During the quarter Jimmy.
Jimmy <unk> commissions and he is now fully operational discharge and I'll, let John add.
Guidance I'll stick to what a great day.
The <unk> team has done a great job safely completing this project.
These discharged capabilities, we have decided to operate more efficiently in the future.
Overall.
Expansion project remains on schedule and will drive production growth and lower all in sustaining costs at the mine in the near future.
I will now turn the call over to Peter to discuss the DBO music assets.
Thank you David and good morning, everyone.
The DPI second quarter gold production of 32000 ounces and copper production of 3400 tons were in line with results from the first quarter and put us on track to deliver on production guidance for the year.
<unk> second quarter, IFC with $741 per ounce, which helped deliver another period of strong margins notwithstanding the higher sustaining capital spend compared to the first quarter as project activities such as the timings dam construction ramped up even draw away the months.
We will see during the quarter was sourced approximately 40% from the underground which is in line with one 6 million ton per annum underground mining targets for the year with the balance of the mill feed coming from surface stockpiles.
We continue to study the options for increasing underground mining rates at the DPA to at least Jim you can ton per annum and.
I would expect to be in a position to share the findings from this work by the end of the sheet.
Exploration drilling is progressing on ore body extensions with targets to the northwest and the depth and we hope to be able to provide more information on these results soon.
We have an analyst tour playing for DPI in August where I'm really looking forward to showcasing the great work being done by the DPI team.
At <unk>, we produced 39000 ounces of gold in the second quarter, 48% higher than the previous quarter increased production was driven by the return of the second ball mill to operation. After a temporary repair was completed at the end of the first quarter.
ISC was $1287 per ounce and.
An improvement of 41% over the first quarter as a result of better production output.
Sorry maintenance team completed another planned inspection of the ball mill in July .
Identified the cracking the trunnion and further lengthened.
Requiring us to take it offline until we can replace the trunnion.
A bolt on replacement was procured when we originally discovered the crack in the first quarter would that replacement triangular already on site and the replacement works currently underway and progressing well.
Final repair works are expected to be completed in this quarter.
In addition to other throughput improvements improvements implemented by the team. This year means that there are limited impacts to production and the Mcrae saw it remains on track to deliver production guidance for the.
Now for Wahid Wahid produced approximately 50 15 sales in ounces of gold this quarter, an increase from the 10000 ounces produced in Q1.
Significant rainfall we experienced in the first quarter subsided, and we were able to return to planned productivity levels and access higher grade areas of the mine that were previously slaughtered.
<unk> was $1614 per ounce and improvement of 26% over the first quarter as a result of better production output.
We anticipate the remainder of the year will continue to be strong and that we will remain in line with production guidance set forth at the start of the year.
I will now hand, it over to Craig to provide an exploration overview.
Thank you Peter.
Last month, we released exploration results from our infield drill program.
Upon the project just north of Hawaii.
We continue to insert exceptional gold and silver mineralization as we focus on converting resources to support the why he not pre feasibility study next year.
Julian ranks have been slow due to weather and the additional time required on directional drilling, but I am pleased to say that we received regulatory approval to add a third drill rig to our program last month.
<unk> has commenced drilling and is focusing on conversion of the northern section of the <unk>.
Bang when drew productivity is expected to be higher contributing to 8800 meters of planned drilling on the project this year.
We continue to actively explore across all operations.
<unk>.
Please exploration updates as results are available throughout the year.
I'll now turn the presentation back to Jarrod.
Thanks, Craig and Thanks, Morris, David and Peter.
In summary, second quarter was a strong one and I'm thankful for the dedicated efforts of the entire <unk> team for delivering that.
We remain committed to our goal to safely and responsibly deliver on the production and financial expectations set at the beginning of the year.
We are focused on continuing to safely and responsibly maximize the free cash flow generation of the company and we made good progress in that journey, realizing the organic growth potential in our portfolio.
Shareholders can be confident we remain focused on running the business, well and investing wisely to create shareholder value and higher returns to shareholders.
With that ill.
I hand, the call back to the operator and open up the line to any questions.
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 Dan here.
Tom prompt acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two and if Youre using a speakerphone you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions.
And your first question will be from <unk> Habib Scotia Bank. Please go ahead.
Thanks, Operator, hi, Jonathan O'shaughnessy called team and congrats on the Q2 beat.
Couple of questions from me really starting off with the strong free cash flow generated in Q2.
Now as the Capex from the Haile underground kind of starts dropping off in the second half should we see kind of progression of this.
This free cash flow I mean, Q3 is supposed to be on the weaker side. So we think there's a little bit of a pause in free cash flow in Q3, and then kind of moving on to Q4.
You can provide on that.
Thanks, Hi, guys. Thanks for the question you tell me what the gold price is going to be and I'll tell you what the cash flow is going to be but.
Constant gold price basis.
Yes, we expect the third quarter to be the weaker one and then the fourth quarter to be stronger.
In the third quarter I believe so.
Yes, it will be pretty much follow the gold production profile for the year.
The production profile at the midpoint.
Capex is on track and assuming we keep the costs in line with the production profile all other things being equal Q Q3 will be.
More like Q1, and Q4 will be more like Q2.
Okay.
Got it and that's also assuming start capex stops dwelling ultimate Yolanda correct.
Correct, yes.
Be supplemented by more sustaining capital elsewhere in the portfolio.
Got it.
And just maybe this is a question for David then.
At <unk> Hill.
Guidance is kind of looking to the lower end of guidance.
Lower grades mined and that too at the mill zone and now the mill is expected to end in Q3, what should we expect kind of going into Q4 in terms of what zones are you guys looking to mine out in Q4 and going into 2024 and kind of what kind of grade profile should we expect going into 224 as well.
Yeah. Thanks, Thanks, Vivek, so I will let David comment on that but.
In the second half of <unk>, we've got a few things going on.
We saw when we lost in Ledbetter.
Performance against our model was much better than what we experienced in <unk> and then of course in the fourth quarter. We've got the first oil from Haile underground coming into the mill. So.
That represents it's quite a dynamic second half for Ohio, but if it has any other color you want to add to that.
Hi, yes, thank you again so.
So we're going to be saving from pretty much the low base.
Before we start getting.
Obviously at the beginning we got.
Low grade ore.
That's why as we start getting the underground and ramping up in 2020, followed the underground.
Are we going to getting to a higher grade.
Got it and David since I've got you on the line you.
You mentioned, great control drilling is progressing around the first production level that they have on the ground.
Have had the results kind of being in line with your expectations.
Tony They can take control of the first call that we jail came a little bit higher than estimated that in the source of all of them. We just added the samples for the second of all.
Last week, so we havent received those samples back in.
But it's coming.
Got it.
Thanks for that David and then just switching gears to the PLO. The optimization study is expected by the end of the year now assuming the study is positive.
And I guess this question is for Peter how fast could you start ramping up the underground throughput.
Peter.
Thanks, so much.
So we currently but that is actually part of the studies, how long will it take us to actually ramp up what is the funnel.
The level of productivity that we think we can get to.
Usually something like this will take at least 12 months to fully ramp up.
And Thats, what I'd expect ultimately the studied to return in that order.
Yes.
<unk> positive so we should be looking.
Forward to sharing those results.
Okay, Thanks, and looking forward to the site trip as well.
In mid August .
That's it for me guys.
Congrats on a good quarter.
Thank you Amit I appreciate the questions as always.
Thank you next question will be from Cosmos <unk> at CIBC. Please go ahead.
Hi, Thanks, Jerry.
Jared.
Maybe first up like Crazy.
As we talked about the <unk>.
Ian was.
Fixed, but it seems like now it has to be.
Replace at least a bolt.
But it doesn't seem like it's going to impact.
Full year guidance can.
Can you remind me maybe.
What the capacity is when both mills up and running.
And.
What do you need in terms of capacity and how the math all works out in terms of.
You're getting to your full year guidance. Despite some of these hiccups.
The training.
Yes, Thanks Cosmos, great Great question.
I'll, let Peter answered, but I'm a crazy.
Yes, it's a really resilient operation and there is a great story, there of adaptation and performance and running what is a low grade mine.
Mill.
Very very well, but they.
I haven't got that question.
Yes, I think I'll answer it a couple of days I think there are a couple of questions in that so the first repay we did flag Jim Breen.
We actually got a company and from the UK to do Middle <unk>, which is.
Commenting.
<unk>.
Steel structures.
We certainly were hoping that would let get let us basically operate through until the end of the sheet.
But we were always planning on doing the plant inspections just to check that.
Planned inspection in late June identified Brexit Linkedin.
But when we did actually obviously when we did do the temporary repair we did two things. One is we bought we procured a bolt on training.
Which would require us to the end of the current dividend and then replace that with a bolt on.
And we also procure.
Feeding costs.
We didn't obviously the repair didn't lost and we've now in the position where were going to install the bolt on training.
We've done the engineering so the phone on element analysis Fas colon.
It looks like that bolt on <unk> can be a permanent repair.
And it's progressing really well so that's effectively a summary of that.
Of the repair.
The as far as the mill throughput guidance, what we've seen out of <unk> over the last three to four months Theres been a number of mill throughput and these improvement initiatives that we've had underway.
The results for Q2, if you look at the MD <unk>.
162 million ton mill feed thats like a $6 5 million tonne annualized rate.
Historically, they've never actually hit 6 million tons in the year so those initiatives.
The team has been looking at are really paying off and that will lay out Q2 to be a very good month higher than what we probably expecting so we claw back some of the deficit from Q1.
We're now seeing in Q3, we'll give a little bit back.
By the time that mill to mill repairs undertaken the full the new.
Processing capacity is back then we will see that those are our rights will continue. So we say that Q4 will be outlet claw back and Thats why we are confident that we can maintain guidance.
Perfect.
Great maybe.
Maybe switching gears a little bit.
To hail and following up on my body of raises questions.
In terms of.
It seems like in Q3, youre going through some of the stockpiles I don't know if this is disclosed but how.
How much stockpiles do you have in terms of.
Available and what's kind of.
I'd like to Greg.
Okay.
I think Mario we have about 2.8 million tons of Ann.
And low grade stockpile.
I think name would be somewhere between <unk>.
70, 585 grams per tonne.
Okay.
And then.
Debbie you mentioned Bill pit, that's coming through and then in Q3, but that's going to be.
Betters coming in phase two is coming in later on I think Empire. Gerrit has answered my question in terms of the grade profile, but.
It seems like mill pit some of the the oil coming out was.
Lower grade.
Correct.
Is there any kind of read through from that into.
Ill, let better as you go into like better any concerns in terms of grade ore.
Gerry mentioned the bottle has always worked out better for lifeboat.
Especially proposal.
So we have a lot.
Another one in Ledbetter, Julia but at one actually.
Really well.
The motto. So we're expecting the same performance on ledbetter to Anthony.
Okay.
And then maybe the underground development when I was on site back earlier this year.
It was already fairly well balanced.
And so could you maybe remind us what still needs to be completed.
To get coarse ore in Q4, and what are some of the key.
We've sort of key drivers here.
So.
We don't really starting this stops.
Would that be well advanced in June .
The decline in getting to a 975 level.
Like we said before in about 80 meters from the 975.
Once we get there.
Youre going to be.
Q4, and then we'll just start mining deal from those stops.
Great.
And maybe one last question.
Jared as you mentioned.
In the MD&A you are still on track to hit the $330 million to $380 million in terms of capital and exploration expenditures for the year, but it sounds like.
Our general operation Capex, the 95 to 100.
$10 million.
You want to come in at the lower end due.
Due to dip.
Al.
Just wondering if that's a timing thing or is it is it cost savings or is it are we going to see higher costs kind of come.
Come back in say in 2024, I'm, just trying to get a better sense.
And then third question no it's not.
Any shift of expenditure from the sheets next will be fairly minor in nature.
And Thats, just due to our ability to properly execute on some of that plant that we probably tend to be a bit optimistic.
That's not uncharacteristic of.
Most companies in this industry. So it's just it'll just be the general sustaining capex that might move over but we also.
Getting better at making sure that we only spend what we need to win we need to and we're procuring smart as well so theres a bit of cost optimization spend optimization and overall cost reduction in OLED as well cosmos.
Great.
Maybe one last question here talking about constantly talked about this a lot throughout 2023.
Finally, seeing overall costs sort of abating, we're seeing inflation come up with a January economy, when I was on.
On site in South Carolina, certainly that was appointed discussion in terms of inflation are you finally, seeing some of the costs abating somewhat.
Some of the areas South Carolina or anywhere.
Else around the world.
Yes. Thanks.
I'll, let Mario answer and provide a bit more color and detail, but at a high level from where we were a year ago in general terms as you know oil prices.
So that obviously feeds into low diesel.
Energy costs.
To the extent strong contract it can be can remain relatively elevated.
But overall inflationary impacts of moderated across the industry to edmar.
More detail on a by category basis, but one of the things that we're also seeing.
Now that supply chains have normalized a bit is is that.
Delivery speed and or delivery risk has improved at that is we can get things sooner.
Which allows us to be better at inventory management, which has a positive cash flow benefit as well, but Morris just from a from a category perspective any color you can provide kosmos yes sure.
Cosmos.
Just looking at just looking at it from a.
Business is baked if we are seeing mixed impacts its not like youre going ahead.
One size fits all where are we seeing increases.
In wage inflation, and obviously with increased competition for talent and resources, that's washing through our cost base.
Also training up Paul grinding media and reagents in APAC in the APAC region.
Elements, where we see it this electricity cost at Haile.
And then from a volume perspective, and let's call it activity level expenses.
Victor.
Maintenance costs are going up in areas, we are seeing that at all with increased maintenance activity.
Obviously with Peter.
Retail that after multi as Costa Washington and <unk>.
<unk>.
This additional ground support costs that were seeing.
As a result of some of the ground conditions on the ground.
The flip side.
Pleasingly, we're seeing double digit increases in diesel and fuel costs and reduction yes.
A reduction of decreases in diesel and fuel costs.
More impactful at the open pit.
Operations were seeing drilling consumables expires this right cost desktop of cost coming down and easing up and even ties although it's still Ed.
Higher than the 2022 levels are we seeing that trending down.
And lastly in New Zealand, we are benefiting from the weak in New Zealand.
And then with the increased Mull feed if we look at the unit cost rates you can see that washing through on processing and G&A costs on the New Zealand operations.
I think the last point.
If I may on the.
The profile it just again highlights the importance of the programs, we have underway, where we focusing on the three key value initiatives across asset management uplift meant.
Procurement excellence and also continuous improvement we are confident that we are delivering sustainable long term value.
Great. Thanks, again, congrats again on a very strong so we're looking forward to the rest of 2023 and thanks again for answering all my questions.
Thanks for the questions Cosmos.
Once again, 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 Wayne Lam at RBC. Please go ahead.
Hey, Thanks morning, guys.
First question, just wondering Hale with the water treatment plant now complete should we anticipate some level of unit cost savings with the reduction dewatering required or improved treatment discharge efficiencies or just curious what we might be able to expect as an offset to the lower grade profile through the back half of the year.
Joe.
Yes.
It.
It gives us a lot more operational flexibility and as you may have seen when you're at site we had a.
A temporary and hide.
Water treatment plant, which we've kept for a little while longer to get well ahead of the curve there, but obviously, we will say that cost, but this thing is more about operational flexibility and.
It's being confident of being able to be in full compliance.
Yes.
With water management so it's.
Yes, David anything else you want to add to that.
Yes, yes. Thank you.
The idea is that this year, we actually going to have all it'd be tire costs.
As we were ramping up.
Good day.
Two.
Yes.
We havent debates.
See a reduction stepper and brought it up late next year.
Okay, great. Thanks, and then.
Maybe just on the underground exploration.
Having having started at horseshoe.
Are there additional drill platforms.
I still plan to be put in place and just curious when we could start to see some of the drill results with the ramp up in activity underground.
Great Great question, why now mean Craig's online I asking me about every second day, when we're going to get some results out of Ohio would look we're really excited about and Craig I'll hand over to you just to provide a general overview, but you can be confident as soon as we have any.
Results of that are material and give us.
Our return on that investment.
Police said that we are investing in exploration at Haile.
We'll release those to the market, but Craig.
The activity level from an input perspective, thats progressing well there Kyle.
Yes, Thanks, Jared and thanks, Brian for the question.
Activity drilling.
Progressing well, we don't have any results seen on the resource drilling as yet.
<unk>.
<unk> commented on the grade control drilling.
The number of holes into the landmark already I think we have completed five holes and another one will be after the land next week.
We're drilling from.
Several platforms as development allowances currently we're drilling from one platform to the resource drilling, but things are progressing well productivity is good.
The rig in terms of meters two shifts.
Yes, the programs going as expected if not a little bit.
Okay.
Okay, great. Thanks, and then maybe just last one for me.
Mccray's did you guys have an estimate of that.
Length of downtime for the second ball mill and then.
Just wondering if you might be able to expand a bit on the mill optimizations.
What's the targeted run rate there going forward with the improvements that you can.
Guys have implemented is that still around a 6 million ton level or should we be kind of thinking beyond that.
Okay.
Yes, Thanks, Brian .
So the as far as the mill throughput. So we've looked at if you look at the Q2 results of 162 million for the quarter that that's approximately six 5 million ton.
Annualized run rate.
Probably about what we really want to be able to deliver on an ongoing basis.
Yes that would give you some indication of what we what we're striving for.
And as far as the.
I guess.
The first question was around the country and was it from a mill throughput.
Yes.
Around the estimated length of downtime for the ball mill.
Yes, sorry, yes.
So the actual trunnion is on sorry to the bolt on front ends on Sean.
We actually have the contractors on site with the old trunnion off the ball mill. So it's already been jacked and set up and the.
Continental cut off we go.
The G setup.
We will start machining early next week.
Yes.
What we're saying is by the end of Q3, because you have these work.
Could be some challenges, but it's progressing really well.
Things go as planned.
Talk of work should take no more than another four weeks.
But because it's obviously worked it can be challenging.
We're giving ourselves a full quarter.
Okay, great. Thanks for taking my questions and good luck with that.
Thanks Wayne.
Just to drill down into the next one is just to round out on the price.
It is a real call out for the for.
For the June quarter for that team I mean that milling rate.
<unk> is well above what they have historically been able to achieve the a grade is lower the recoveries are higher.
Great.
Operation, that's a fantastic combination and they continue to pull.
Or out of the ground that from the open pit, especially at what I think is industry, leading right. So I think the crisis.
Reducing the volume it does at the all in sustaining cost.
As I've said in the in the coal a nice window into what its potential is is when it's running well.
Sorry, operator next question.
Yeah.
Thank you next question will be from Mike Parkin at National Bank.
Hi, guys. Thanks for taking my call and congrats on a good quarter.
Just a couple of housekeeping items.
I may have missed it but the mccray's repair costs those will be capitalized not expense.
That's correct.
Yes.
Okay and then.
While you are running for the two to three months on one.
Ball mill are you.
Is it exactly kind of 50% of capacity are you able to push it a little more even though you're running one line.
Yes, so even this month.
Ireland's demonstrate higher throughput rates and we probably had traditionally seen on the back of those.
Throughput improvement projects.
The actual impact.
<unk>, we're running still at a 75% capacity between 70 and 75%.
Would you gain.
Assuming that were down for a quarter.
You guys still allows us to be comfortable that.
That guidance can be met.
So yes, we are still seeing that improvement.
Initiatives flowing through even though.
Little too as Dan obviously, when <unk> comes back up then we can continue to run at those higher throughput rates.
Okay and are you taking advantage of that line being down in terms of any other company.
The maintenance.
We seem to have lost Peter Mike.
Okay.
Yes.
Okay.
The IR team to maybe just follow up with something that would be awesome.
And just last question is there any other.
Shutdowns within the operating base that we should be aware of for Q3 Q4.
Short answer is there are other shutdowns.
I know why he has them.
Mill shutdown.
On the way at the moment.
They are scheduled during the year.
That profile of shutdowns as one of the variables that's contributing to our guidance for Q3 to be the weakest in Q4 to be another strong quarter. So yes. There are shutdowns from time to time I'm just reminded Mike.
Not so much for you, but for everyone on the call, whilst we say bundle a ball mill two weeks, Dan we actually have full mills that <unk> two Sag mill two ball mills that Wouldnt pay that said you've kind of got you running at 75% you've got 75% of.
A couple of million capacity, which for reasons that he also said we've been able to operate the overall complex.
Better than <unk>.
So it's.
It's a headline loss of capacity, but what historically might have otherwise state.
So can you actually run the other sag and just bypass the ball.
Yes.
Okay.
Oh, that's interesting okay. Thanks, so much guys that's it for me.
Thank you Mike I appreciate the question.
Thank you again, 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 Farooq Hamed.
Raymond James Please go ahead.
Hi, good morning, everyone.
So lots of operational questions on this call. So maybe I'll ask a strategy question.
<unk> for you.
So look the operations they've come around and this was a good quarter in <unk>.
Good to see all the operations kind of running.
The way that they can.
So assuming that Haile underground kind of goes as per plan and youre into the production in the fourth quarter and the gold price you've talked about the gold price earlier in the gold price stays $1900 or above.
We look out two to four quarters, and you're kind of running as expected Jared.
Do you see as the strategy at that point for a company like what would you like to do.
At that point are you are you kind of just.
Looking at the expansion you're seeing at Haile and <unk> increased production and then maybe WK Pee in a few years.
Or is there kind of another leg here for you in terms of maybe adding another asset whether it would be kind of a development asset or a production asset.
What do we expect for the strategy from Oceana over the next let's say year.
Thanks Farooq.
Yes.
That future you paint is one we want to be heading to Brian .
<unk> operations delivering to potential generating lot of cash you can expect that as Maurice alluded to we will further reduce the debt that we have but we don't have much debt but.
I can get it lower debt costs more now than it used to.
Way back to paying dividends as it always has the option to increase dividends, we have growth opportunities around the business that wed love to prosecute we have exploration upside potential that at all.
Oh, sorry at least three of that forest assets.
Putting money into.
And.
And that.
That organic growth that we have in the portfolio.
Hey, just speaks about it the <unk>.
We got a nobody there open at depth.
With the potential to increase the mining rate the leverage value that is enormous.
The potential for us to find more gold at Highlander brand increase the highlands Grand mining rate.
Thats more days so.
I think we're in the businesses maximizing the free cash flow generation from our operations safely and responsibly and I think we've got loads of opportunity inside the portfolio.
As we generate more cash we can put more two exploration we've got.
Land packages, particularly in Philippines.
Sorry about existing.
On operating area and so we can take advantage of that and then yes.
As we strengthen and as we get the conference.
The investment community, there's always the ability to to look outside the portfolio.
In the very near term.
Our focus is on maximizing the free cash flow generation, we have strengthened our balance sheet increasing shareholder returns.
Okay. Thanks for that so maybe to paraphrase what you said.
What we should expect as a focus on internal growth opportunities as opposed to external growth is that is that fair to say that that's the priority.
So that's what we have on the slide that Youre looking at on screen right now that's how that's how we think about it I mean, obviously, we have to be mindful of opportunities outside of that portfolio that could present from time to time at our ability to take advantage of that is <unk>.
Perfectly correlated with our continued strength balance sheet strength, our operating performance. So we have a very small business development team and thats not a reference to the highlights but a number of people.
And the job is to scan and make sure that we're.
Just the opportunity that we can take advantage of that.
That's also what we have to have and I too so I'm.
Im not so binary you're saying, it's in or out, but im Layton hopefully paint with a very clear expectation today, our very near term focus is on running the business, we had very very well.
Okay. Thanks for that and then maybe the last part of this is <unk>.
Assuming that you do see some external opportunities that are attractive.
Are there certain.
Ratios or targets or hurdles that you need to see within Oceana before you Act externally like things like cash position our debt position.
Or.
Cash flow profile or anything like that is there is there any.
Internal targets that you have that you want to hit before you look externally.
Internal Todd sorry, not not really.
Farooq I mean, if I understand the question right.
No we have.
We've got the balance sheet now down to a pretty strong position our leverage ratio of three four times.
Yes.
Is low we don't have an exploration per se to be net cash, but its a great spot to be.
These things have a temporal dimension you can be.
Yes.
We don't fixate on any one point in time.
What the attributes of the anything that we look at obviously and this is the hardest thing in our industry. When you when you start doing inorganic growth, making sure that anything we do at portfolio as of <unk>.
In value to the Oceania gold shareholders.
That's the thing that we'd be looking for I mean, it would be nice to have another asset in the portfolio are nice to have two more assets in the portfolio, but in the journey to getting there obviously, our preference would be to find it.
Through the through the drillbit and Craig's efforts.
Early stage entry.
Junior companies.
But we obviously have to if we deploy.
Any acquisitions funding to that since we've got to make sure that we get an asset that we believe can.
Ron well, we can run better than the.
The previous arena, which is actually a lot harder than it sounds.
<unk> has exploration upside and making sure that we buy it at a pricing can convert that potential to the betterment of.
The Oceania gold shareholder.
That's the lens, we look through it but there's no there's no burning platform for us to do that we have the luxury of having one of the best near term organic growth profiles.
In our industry. So we feel like we've got the time.
We can take that time to continue to prove that we can run well what we have strengthened the balance sheet to put us in an ever better position.
To make those kind of decisions.
Okay, alright, well, thanks for that Jerry I appreciate the insights.
Thank you.
Thank you and at this time it appears we have no further questions. Please proceed with any closing remarks.
Well. Thank you operator, and thank you to the team here everyone at <unk>, but also all of the listeners on the call really appreciate you dialing in really appreciate the questions that concludes our webcast and conference call. A replay will be available on our website later today and on behalf of everyone here at <unk>.
Wish you a very pleasant rest of the de bottleneck.
Thank you, Sir 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.
Okay.
Okay.
Yeah.
Okay.
Yeah.