Q3 2023 OceanaGold Corp Earnings Call
Good morning, and afternoon, ladies and gentlemen, and welcome to the Oceana Gold 2000, Twenty's weak third 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 and if at any time. During this call you require immediate assistance.
Please press Star zero for the operator also note that this call is being recorded on Thursday October 26th 2023 at nine a M. Eastern time, and I would like to turn the call over to Rebecca Harris. Please go ahead.
Good morning, and welcome to Oceana Gold's third 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, Mary Van Niekerk, Chief Financial Officer.
Have you planned on young Chief operating Officer, Americas, Peter Sharp, Chief Operating Officer, Asia Pacific and Craig <unk>, Chief Exploration Officer.
Also present is Brian Martin Senior Vice President business development and Investor Relations.
The presentation that we will be referencing during the 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 on this conference call are in U S dollars.
I'll now turn the call over to Jared for opening remarks.
Thank you Rebecca and good morning to everyone. Thank you for joining us today.
I'll begin now I'll review of our Q3 results with safety.
12 month, moving average total recordable injury frequency rate at the end of September was $4 one per million hours worked.
This is a little above what we've reported previously which would really be.
However, this is coming off industry, leading low injury rates and the nature of the injuries, we had unfortunately been low severity.
We are committed to creating a safe workplace address you on the Gulf and in support of this we are rolling out the <unk> program across our business.
Which is a proven program that focuses on our workforce beaten path to work safely and to wisely identify risks before performing that task.
From a production standpoint actually on the Gulf, which is just that with 99000 ounces of gold and 3400 tonnes of copper in the third quarter.
At the start of the we did expect Q3 to be our weakest quarter. However, as detailed in our September 14th news release.
It turned out to be weaker than expected due to the poor grade reconciliation and the final benches of the mill zone pit.
Mining in mills are in is now complete so that reconciliation issues behind us and we have transitioned into a stripping phase at the ledbetter pit.
The third quarter was additionally impacted by disappointing production from Y driven by an increased reliance on Redmond start materials in the period.
We expect to source more ore from fresh stoping areas in the fourth quarter and finished the year with stronger production in Hawaii.
This one is low production highest celebrated a number of positive milestones during the quarter, including mining its one millionth ounce of gold since start up in 2017.
<unk> also delivered first development ore from the Horseshoe underground in the third quarter.
Subsequent to quarter entitled Blasted. Its first start and has now begun processing through the mill, but start and development goal.
So I think we already blasted the portal at the beginning of the mind 13 months ago.
We're extremely proud of the team for achieving these milestones with you on the ground safely and on schedule.
At <unk> the ball mill was repaid and returned to full operation enormous with no further disruptions from the tissue is expected going forward.
The rate of <unk> now higher than ever before as a result, some delaney is derived through these prepaid periods and as high milling rate is why we expect the crisis to perform strongly for the remainder of the year.
During the quarter, we released some excellent exploration drill results at the <unk> with the results from bars, representing an exciting upside to our current plants at those operations.
Craig will share more about this later on the call.
Moving onto guidance.
Although the highest full year production guidance is now lower than originally expected the strong performance and outlook at both <unk> and the GPO allows us to remain within our original group production guidance range.
With three quarters behind us we're tracking towards the bottom end of the original production guidance range for the year and have narrowed the top end of guidance to reflect these changes at a group level.
Consolidated gold production guidance now sits at 460 to 490000 ounces of gold with 347000 ounces produced year to date.
Copper guidance remains unchanged and we're expecting to be towards the top end of the 12 supporting Fas in ton range with more than 10000 tonnes of copper produced so far this year.
As mentioned due to the lower production from higher low all in sustaining cost guidance will consequently increase we've updated group cost guidance to be 50 to 852 six to $850 per ounce.
Overall total group Capex and exploration expenditure is on track to be within our full year guidance of $330 million to $395 million.
We know that delivering on production guidance. He is a key expectation in the market.
Our focus remains on delivering within our original production guidance range, while continuing to focus on operational efficiencies to safely and responsibly Laura costs in producing those.
I'll now turn the call over to Morris, who will provide an overview of our third quarter results.
Thank you Jared and good morning, everyone.
As Gerry mentioned, our Q3 production performance was our weakest quarter of the year.
Consequently, we generated negative $30 million of free cash flow during the quarter, which included higher pre stripping and underground development cost at Haile.
However, our strong first off and then improvement expected in Q4, so positions us well to continue to be by date when appropriate.
And to invest in organic growth opportunities across the business.
During the quarter, we repaid $15 million on our revolving credit facility and in October we buy a semi annual dividend of one <unk> totaling $7 1 million.
Year to date, we have generated $759 million up revenue.
EBITDA up $312 million.
And made profit after tax of $102 million.
Our Q3 net loss after tax of $6 million was significantly lower in the previous quarter.
When adjusted for the noncash unrealized foreign exchange loss and other items. This equated to an EPS of <unk> <unk> fully diluted.
While operating cash flow quite the same specie.
Okay.
Our financial position remained strong with $172 million in a date.
<unk> and liquidity of $175 million at the end of the quarter.
At a leverage ratio of four one times, we have the financial flexibility to continue investing in the exciting growth projects across our business.
This quarter, we accrued $13 9 million for the additional government shape, David in terms of the <unk> with the Philippines government.
This is the finished accrual and the final amount due for 2023 will be finalized.
Payable in Q2 of 2024.
It was driven by strong operational performance and higher gold prices, resulting in higher ounces and profitability.
In broad terms, the Philippines government is entitled to a 60% share of May trailing you. Once the company is effectively recovered its capital investment in <unk>.
In Q3, we effectively cross the threshold and.
And expect to find additional government shape moving forward.
<unk> is essentially a modified EBITDA calculation was all out of Texas by including production.
And with all the Texas, forming part of the government shape.
It is in the nature of an income tax and for that reason excluded from IAC.
With the first Simon due in 2020 full and given that.
Additional government shape payments are expected to continue annually day. After we will provide annual guidance based on the defined maple pricing assumptions guidance forward.
Okay.
Thank you Mario and Hello, everyone.
Fifth quarter gold production with Talos for any 3000 ounces.
Quarter on quarter reduction was driven by lower than expected grades from the bottom benches within the installed base.
Mining for meals on less completed on schedule during this quarter.
Thanks, Jason.
Draping the next perspective.
Which is little better place too.
This will continue through the fourth quarter and our production from Lindbergh, Joe we ramp up.
Half of 2024.
Discussing the recent September news release.
As for the <unk> production is now expected to be lumpy already generic guidance range set out at the beginning of the year.
Have revised the range to 140 <unk>.
<unk> thousand ounces.
The year to date performance.
Sort of the lower production all.
Also an increase of 2023 cash cost and all in sustaining cost ranges.
During the quarter, we continue really horseshoe underground with two rigs focusing on bulk Greg control infrastructure conversion greatly from which really leaves from various policy in September.
Greg will discuss more on baas sharply.
Now moving into high yield expansion.
Q3 marked a significant milestone I would say as a reminder, there is no relevant or from horseshoe in better balance.
Our west mine until Airbus.
The buyers on the sort of personnel during the quarter.
In mid October we blasted out staff from the <unk> level.
Processing, the stockpile and the stockpile development or revenue.
Continue to advance development as we ramp up to full production rates by the middle of 2020.
Great control drilling in advance of production has written a results in line with expectations given us increased confidence fourth quarter three stops that we plan to mine in Q4.
The detailed planning and execution has resulted in delivering the horseshoe underground in the fourth quarter.
In line with our guidance to the market set for at the start of the year.
I'm delighted to announce that we were there any bulk tomorrow and our first stop already in October and I command the team for their great work in making this drop and safely.
This project will drive production growth and lower all in sustaining costs obtained over the coming years and will make an outsize impact the future outlook of free cash flow generation for Oceana cold.
I will now turn the call over to Peter to discuss with Epo music assets.
Thank you David and good morning, everyone.
At the <unk> third quarter gold production of 30000 ounces and copper production of 3400 tons were in line with our full year plan.
When added to the results of a strong first half.
We are tracking ahead of the original 2023 guidance.
With that we've increased gold production guidance at the GPO to between 125000, and 135 sales and answers of goals in.
And maintain copper production guidance, although we do expect to be at the top of the 12000 to.
14000 ton range.
Similar to year to date production a strong first half cost performance has driven $100 per ounce all in sustaining guidance reduction for the GPI.
We are making good progress in our study to increase underground mining rights to at least 2 million tonne per annum.
And positive results suggests that we will advance the study to a PFS level from a scoping study.
We hope to be able to provide a summary to the market in the knee and include the findings of the fulsome updated Ni 43 101 in the first half of 2025.
We continued investing in community projects during the quarter inline with our commitments.
And exploration drilling is also progressing on ore body extensions with targets to the northwest and the dips.
I will let Craig speak more about results released during the quarter shortly.
Now on to the crisis.
<unk> produced 35 sales announces of gold in the third quarter.
12% lower than the previous quarter due to the additional work undertaken on ball mill too.
I'm happy to say that in late August we completed the full repair of the mill and it was returned to full production levels.
Despite the challenges with ball mill to it in the crisis.
The team has done a fantastic job without a throughput initiatives that more than offset the losses from the ball mill downtime this year.
With that we are increasing <unk> production guidance to 130000 to 140000 ounce of gold for the year in.
I would expect to be able to continue operating at these higher mill throughput levels going forward.
All in sustaining costs during the quarter was $1550 per ounce, which is the second quarter in a row that we've been below guidance range.
The higher than expected production has helped drive lower unit costs.
As such we are allowing our all in sustaining guidance by $50 announced for the year at <unk>.
Fraser's underground operation was schedule to be complete by the end of the first half of 2023 with focus shifting to Golden point underground.
We have pleasingly encountered additional remnant ore at <unk> underground, which will allow us to continue mining the into the first quarter of 2024.
At the same time, we continue to study the options around the round Hill open pit and expect to be able to update the market as part of our annual R&R update next year.
Now to the North all of the Zealand, where or why he operation produced approximately 11000 ounces of gold this quarter.
The decrease in production compared to the previous quarter was primarily due to challenging ground conditions encountered in the areas of the mine with fresh all stripes I'll, let excited <unk>.
Putting enough mining more ore from lower grade remnants stopes in <unk> state.
We expect to move into higher grade fresh types in the fourth quarter and still expect to be within our original full year guidance range.
All in sustaining cost for the quarter was higher than the previous quarter, driven by lower gold sales and higher operating costs, namely contract where could costs.
We continue to work towards lowering these costs.
The year to date cost performance and outlook, we are increasing all in sustaining cost guidance for 2023 at Wahid.
I will now hand, it over to Craig to provide an exploration overview.
Thank you Peter.
During the quarter, we continued on brownfield exploration programs across the business focusing on creating value by resource conversion and growth.
Donny and hail during the quarter, we released an exploration update which delivered results from both horseshoe and palomino in line with and in some cases better than our expectations.
One of our best holes drilled to date targeted the conversion of the lower horseshoe inferred resource.
<unk> 74 meters at 13 grams per ton gold.
Turn better than expected expected grade.
This high grade zone at the bottom.
<unk> remains open at depth and is an exciting target that we are planning to drill in 2024.
Our resource conversion program at Palomino has also been successful with drilling now largely complete.
We look forward to updating the market on the progress in 2024.
During the quarter. We also released exploration results at <unk>, where we continue to convert resources in depth extensions.
All 611 for example returned 72 meters at three four grams per ton gold equivalent which provides further opportunity to extend the resource.
At least another 100 meters below the current existing inferred resource.
Infill drilling continues higher up in the mine with results in line with expectations to date.
Further drilling is planned for the remainder of this year and in 2024 to support the technical report in the first half of 2025.
Finally at <unk> drilling continues to extend the high grade southern shoot on the EG vein at <unk>. We are in the process of preparing a new drill platform to continue testing it strike extent.
We have the third rig down drilling on site and expect to provide further updates to the market as results come in.
I'll now turn the presentation back to Jared Thank you.
Thank you Greg.
In summary, our third quarter results represent our weakest quarter of the year, we expect to improve in Q4 and deliver production of its in the bottom end of the original production guidance range.
We are focused on safely and responsibly and maximizing the free cash flow generation of the company and although Q3 was another good quarter. In this regard it was a quarter of considerable investment and our outlook for organic growth and free cash flow generation in 2024 and beyond remains strong.
Shareholders can be certainly remain focused on running the business, well and investing wisely to create shareholder value and high returns to shareholders.
I'll now turn the call over to the operator and open up the line to take 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 then hear a sweet home 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, we do ask that you. Please lift the handset before pressing any.
Please go ahead and press Star one now if you do have any questions.
And your first question will be from <unk> Habib Scotiabank. Please go ahead.
Hi, Good morning, Jim Robyn.
So for me please.
Starting off with Haile underground.
You guys are doing a lot of infill drilling great control drilling.
And into the Stopes you have three stopes prepared for.
For Q4.
Can you give us any sort of kind of.
Information on how the grade control drilling has been progressing I mean, you talked about it in line is it is it giving you confidence that the tons.
Guns and war that you were looking for is is going to be.
Produced in Q4, and kind of any sort of <unk>.
Right on what 2024 might look like.
Yeah. Thanks, Hi, guys. Thanks for the question I'll hand, it over to the bid for detail, but yes, I think we have to your point. We have said previously that we expect that we have great control drilled all the areas that we intend to mine this year and that gives us a high degree of confidence.
What we expect to occur from underground will occur and so far it has performed accordingly.
That's a couple of laser production.
David.
You want to supplement that answer with anything.
And also the brake controls that we did three holes that we drilled so far that's coming.
A little bit actually higher than they are so small that is showing so we expect that we are going to be at the smaller level or better than that we expect we'd also you've seen a little drill.
The bottom the middle and the top of the of the Donald.
Again that information is coming possibly.
So we're very confident that we can achieve the tonnes and grade.
We had expected.
That's great.
Thanks for that then and just.
In terms of underground development rates.
That kind of on target do you need to be better in terms of opening up the mine on underground development.
And also maybe if you can talk about how this kind of capex shaping up for going into the end of the year is that starting to taper off or should we see some of the capex kind of going into 2024 as well.
So development that currently we are doing much better than we're forecasting or we were doing through Q3.
330 meters per month.
Hi.
Talbot is shaping up to be a little bit.
About 400 meters. So we're very happy with the performance in the development.
So.
So some of the Capex. So it seems that the production now of the underground. So we can have some operating costs and obviously that the illumina is going to be capitalized, but the capex foray.
The original project is pretty much finished.
Excellent thanks for that and just last question moving and maybe switching gears to <unk>.
It means that did the deal.
Obviously.
An optimized study.
To come out in the next couple of months.
In terms of how youre looking at that study.
Maybe this is question for a drug like is this study going to give you enough information to go forward with the project assuming it's a positive study.
And or do you need to do additional studies to kind of give the green light to the project.
Yeah. Thanks, Vivek, so look on the <unk>.
Highly confident that that study would take us.
In some direction towards confirming and perhaps extending the articulated target of being at least 2 million tonnes per annum.
I mean at one level it seems over a simple fact mechanical optimization.
But there is a lot of mine planning associated with that so the scoping study, we expect to move into a.
A pre feasibility study and so there is a bit of work to it.
Do you want to put any color on that answer.
Sean Hi, how are you.
So we will be entering into a PFS of ice.
But I mean, I think what we're seeing already is that.
Yes.
The outcomes of the scoping study are quite positive so we'll be taking into payer base, because we need to and we do need to look at the various options around how do we actually tightened project forward.
But the reality is we will be progressing in parallel any opportunity that's more business as usual around uplifting the underground right just because we've identified through this process.
<unk> that we can just get often now so I don't expect it to be a long drawn out two to three year study more expect that will move from pay Fas quickly in the Fas.
I think we will have a very firm plan on what we can do in <unk> and the target to go after.
Thanks, Thanks for the color on that Peter and John.
That's that's all from me thanks for taking my questions.
Thank you.
Once again, ladies and gentlemen, if you do have any questions. At this time. Please press star followed by one on your Touchtone phone.
And your next question will be from Wayne Lam at RBC. Please go ahead.
Yes, thanks, good morning, everyone.
In terms of the.
Great control drilling.
It seems like you had some issues.
At both Haile and why and I recall last year, there was a similar issue.
As well on the reconciliation.
Just wondering if you could.
Provide a bit more detail on I guess what happened at Haile.
On the mill pet and.
If there's any steps that can be done to kind of.
Help improved grade control program or.
Anything operationally that can help mitigate those surprises or volatility in grade.
Sure. Thanks, Brian look I mean.
It's worth noting that mill zone, where we experienced this underperformance at mill Zone G.
For much of its time for them to within 1% of expectation as it relates to both grade and tonnes of mill plant actually performed well, but in the in that final quarter.
Quarter in a bit.
Actually underperform, because we were at the final two benches.
Great control drilling was.
The first point the greatest great control drilling with spot, we had to drill holes into that.
One was that something like four five grams, a tonne the other ones that 13 grams a tonne.
Estimate of what the rate would be but of course that into place and that music estimation of the guest imation didn't pan out the actual shaped differently.
Two the deflation and so we'd like to think of mills aren't having performed well, but in the staff that final stubhub.
All of the pit.
<unk>.
It did not so we don't think theres any systematic issue as it relates to.
Hale at all.
Led better has performed well and of course, we're at the upper benches, better now in which it has a great integrating great control drilling so we remain confident of it better.
That we intend to mine in coming years, we will not experience the same issues that the final two benches.
<unk> at why that was.
A different issue that was yes that was in the first quarter of last.
Calendar year.
And issues that we experienced this quarter had more to do with.
The mix of where we were mining grade control drilling.
So it was not a great control issue.
Why other than when you are mining more in Brendan stope areas.
The level of grade control drilling that you can do and then stope areas.
Definitions less.
Then you can do.
Yes.
Yes.
Okay, great thanks for providing that color.
And then just maybe wondering if you can comment on some of the cost creep youre seeing at Wahid.
Does any of that applied <unk> in terms of increase in labor costs.
Look I mean, there is labor inflation across the board.
Universally globally.
Hello <unk>.
The issues that at.
Wahid as it relates to cost on a per unit basis in both due to the small number of units than anything else now three quarters of the increase seen in.
Unit cost guidance and performance even in the quarter.
Due to the lower units.
Labor inflation, specifically mentioned in relation to why he is more due to the fact that.
We.
Struggled to fill some sites and we had to get contract labor and then by definition contract labors is a little more expensive.
<unk> done a great job.
Kind of restoring that but you can get caught short on a.
On head count for certain roles at that point in time said, we supplemented that with contract labor, but that number of contract laborers at why he is also reducing now as yourself.
Our recruitment efforts.
At FX hits.
Okay, great. Thanks, and then maybe just last one for me.
I just wanted to clarify on that additional government share.
Did you guys say it will be paid out annually in next in Q2 and that includes the various local business taxes and excise taxes and then just also curious.
Why that is reported separately are not part of your <unk>.
Consolidated income taxes income taxes.
Yes, it's a full month with just that last question as a form of income tax, but it's not an income tax.
I think for <unk>.
Clarity.
We will break it out and show it separately.
The nature of it is it has.
<unk> income tax, but it's technically not an income tax.
And to your question, yes. The answer resides in your question, Yes, we do paid annually.
And it is as described by Morris.
In essence, an EBITDA minus all other government taxes paid.
It's a net revenue calculation the net the calculation is actually in the 43 101 statement that we put out in March last year and.
All all taxes paid to government, whether it be income ex us withholding in luck deductions.
In that calculation.
Okay perfect. Thanks for taking my questions.
Thank you Lynn.
Thank you as a reminder, ladies and gentlemen, if you do have any questions you will need to please press star followed by one on your Dutch Jonathan.
And your next question will be from Mike Parkin at National Bank. Please go ahead.
Hi, guys. Just one final question from me could you give us.
Give us an update in terms of water management.
Hail in terms of <unk>.
You've got the bigger water treatment plant, there and how is that kind of going in overall, where you kind of come from versus where you are versus where you kind of expect to be in the next 12 months from what I remember from the sites who earlier this year.
It sounded like youre going to be moving into a better and better positioning with water management and that would also kind of help your cost structure going forward.
Yes, great Great recollection, Mike and thanks for the question I'll, let David answer it in detail, but yes, I think water management at <unk> now.
<unk> success story.
Hi, good morning.
And Michael so.
Deliberate piece, which is where we are mining correctly.
Down to our last 80 million gallons on that date, and we are moving about 100 million gallons a month.
We were going to be dry and that paid by the end of this month.
How does that get paid but we have about 250 to three 300, maybe on gallons.
I was going to be in the next three months. So by February we are pretty much going to be out of the contact water. So we will be.
And pretty much just say working as reins just a bump in any.
Comps from trains.
We're pretty much out of the woods from Beth.
Great. That's a great update thanks very much guys.
Thank you Mike.
Thank you.
Again, as a reminder, ladies and gentlemen, if you do wish to ask a question.
Press Star one now on your Touchtone phone.
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Thanks, operator.
That concludes our webcast and conference call today, a replay will be available on our website later today.
The management team and everyone at Oceana Golar I appreciate you joining us and wish you a very pleasant rest of day pass now.
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.
Okay.
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Great.
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Yes.
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