OceanaGold Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 12 speakers on the call.

Operator

Morning and afternoon, ladies and gentlemen, and welcome to the OceanaGold 2023 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. And I would like to turn the conference over to Rebecca Harris. Please go ahead.

Speaker 1

Good morning, and welcome to OceanaGold's Q2 2023 results webcast and conference call. I'm Rebecca Harris, Director of Investor Relations. We are joined today by Jared Bond, President and Chief Executive Officer Marius Van Niekerk, Chief Financial Officer David Londono, Chief Operating Officer, Americas Peter Sharp, Chief Operating Officer, Asia Pacific and Craig Febre, Chief Exploration Officer. Also present is Brian Martin, Senior Vice President, Business Development and Investor Relations. The presentation that we will be referencing This conference call is available through the webcast and on our website.

Speaker 1

I would also like to remind everyone that our presentation will be followed by a Q and A session. As we will be making forward looking statements during the call, please refer to the cautionary notes included in the presentation, news release and MD and 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.

Speaker 1

I will now turn the call over to Jared for opening remarks.

Speaker 2

Thank you, Rebecca, and good morning, everyone. Thank you for joining us today. I'm pleased to say that we delivered a strong second quarter, producing just over 130,000 ounces of gold and 3,400 tonnes copper at an all in sustaining cost of $13.18 per ounce. This resulted in strong free cash flow generation. On safety, our 12 month moving average total recordable injury frequency rate of 3.5 per 1000000 hours worked increased from the record low achieved in the Q1.

Speaker 2

Whilst this is still a good result 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 our workforce. A planned launch of our refreshed safety behavior program occurred during the quarter, which is a key element of our plan to ensure everyone works safely at OceanaGold every single day. From a production perspective, both of the New Zealand operations rebounded strongly in the Q2. The heavy rainfall impacting Waihi in the Q1 subsided, allowing access back into the high grade stopes at Martha Underground. At Macraes, the temporary repair to 1 of the bore mills was completed at the end of March, allowing a full quarter of production from all four mills and that allowed us to show the potential of Macraes.

Speaker 2

Didipio was a very steady producer Quarter on quarter and Haile had a solid quarter, albeit lower than Q1. Strong production, even stronger sales, together with reduced all in sustaining costs drove strong free cash flow generation of $72,000,000 for the quarter. From a shareholder returns perspective, during the Q2, we paid our previously announced $0.01 per share semiannual dividend. And in our Q2 results, we announced the next $0.01 per share semiannual 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, our partnerships and in our commitment to integrity, high standards, governance and transparency.

Speaker 2

Development of the Haile Underground remains on schedule with the decline now approaching the 3rd production level and first ore is expected to the mill in Q4 of this year. As you know, the Haile Underground really powers our production growth and all in sustaining cost reduction in coming years. So its progress and near term first ore is really exciting. With all that, we remain on track to deliver our 2023 production This slide looks to compare how our 2nd quarter and first half outcomes on some key metrics compares with full year guidance. The Q2 and first half outcomes are shown in the circles and the full year guidance ranges are shown by the triangles for each metric.

Speaker 2

On production, we've produced 248,000 ounces of gold and 6,900 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 $13.18 per ounce The 2nd quarter resulted in a first half all in sustaining cost of $14.29 per ounce, which as you can see is at the low end of the full year 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 grade profile across the group, we expect this coming quarter, the 3rd quarter, to be the lowest production and highest AISC quarter of the 2023 year. We then expect the 4th quarter to be another strong one. At constant metal prices, our expectation is that free cash flow will broadly follow this profile.

Speaker 2

So we're able to confidently reaffirm our 20 Within that, Didipio is on track to achieve the upper end of its annual production guidance, while Haile is tracking towards the lower end of its production guidance. I'll now hand the call over to Maris to provide an overview of our Q2 financial results.

Speaker 3

Thank you, Jared, and good morning, everyone. As Jared mentioned, we had a strong Q2 financial results, driven by strong gold sales, which included gold in transit at the end of Q1. Revenue for the quarter was $301,000,000 a 23% increase from Q1 and the strongest half year revenue on record. EBITDA for the quarter was $153,000,000 which is 53% higher than the prior period. The quarter benefited from gold sales of 139,000 ounces as well as higher realized gold prices compared to the prior quarter.

Speaker 3

Net profit after tax of $69,000,000 was 76% higher than the Q1. When adjusted for the non cash unrealized foreign exchange loss, this equated to an EPS of $0.10 per share fully diluted, while operating cash flow equated to $0.21 per share fully diluted. Off ahead of analysts' consensus estimate, We reported free cash flow of CAD72 1,000,000 driven by higher gold sales and increased production. It is a significant improvement from the Q1 and we predict continued cash generation for the second half of the year. Our financial position continues to strengthen with $136,000,000 in net debt and liquidity of $215,000,000 at the end of the quarter.

Speaker 3

At the leverage rate of 0.34x, we have the financial flexibility to continue investing in the The next scheduled rollover period for the drawn funds on our revolving credit facility is this month, 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 David to discuss the Haile operation.

Speaker 4

Thank you, Marius, and hello, everyone. 2nd quarter gold production at Haile was 44,000 ounces. The quarter on quarter reduction was driven by lower than expected upgrade encountered in the lower benches of the Mill Zone pit. Production from Mid Zone is expected to be completed in the Q3 and mining will transition into the next phase of the latter pit. This sequencing means that the Q3 is expected to be the lowest production quarter of the year, but the Q4 will benefit from the introduction of higher grade from the underground ore fleet.

Speaker 4

Full year production is now expected to be towards the lower end of the guidance of between 170,000 and 185,000 ounces of gold. Paid all in sustaining cost for the quarter was $13.51 per ounce sold. Full year all in sustaining cost is expected to be towards the higher end of the guidance of $1500 to $1600 per ounce due to the production profile through the second half of the year. We're now drilling Horsea underground with 2 rigs, focusing on both grade control and resource conversion drilling. We're also continuing to delineate Palomino and expect to deliver a pre feasibility study on this project in 2024.

Speaker 4

Now regarding the Haile expansion. We continued to advance development during the Q2 at the horseshoe underground. The decline has now reached the McVeigh on the 9.90 level and is approximately 80 meters from accessing the 9.75 level of the mine, which is the 3rd production level. Development rates averaged approximately 300 meters per month during the quarter. We're in the process of preparing the first ore stops for mining later in the year and have begun the grade control drill program and remain on track to deliver 1st ore to the mill in the Q4.

Speaker 4

Work continues to advance at our surface projects as well, with great progress being made at both the Westpac facility and the tailings storage facility expansion. During the quarter, the new water treatment plant was commissioned and is now fully operational, discharging over 2,500,000 gallons of 3 to 1 per day. The Hague team has done a great job safely completing this project and the increased discharge capabilities We have decided to operate more efficiently in the future. Overall, the Haile expansion project remains on schedule and will drive production growth and lower all in sustaining cost of the mine in the near future. I will now turn the call over to Peter to discuss Didipio and our New Zealand assets.

Speaker 5

Thank you, David, and good morning, everyone. At Didipio, 2nd quarter gold production of 32,000 ounces and copper production of 3,400 tons were in line with results from the Q1 and put us on track to deliver on production guidance for the year. Didipio's 2nd quarter AISC was $7.41 per ounce, which helped deliver another period of strong margins, notwithstanding the higher sustaining capital spend compared to the Q1 as project activities such as the tailings dam construction ramped up in the dry weather months. Mill feed during the quarter was sourced Approximately 40% from the underground, which is in line with the 1,600,000 tonne per annum underground mining target 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 Didipio to at least 2,000,000 tonnes per annum and expect to be in a position to share the findings from this work by the end of this year.

Speaker 5

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 planned for Didipio in August where I'm really looking forward to showcasing the great work being done by the Didipio team. At Macraes, we produced 39,000 ounces of gold in the 2nd quarter, 48% higher than the previous quarter. Increased production was driven by the return of the 2nd ball mill to operation after a temporary repair was completed at the end of the Q1. AISC was $12.87 per ounce, an improvement of 41% over the Q1 as a result of better production output.

Speaker 5

The site maintenance team completed another planned inspection of the bore mill in July and identified that the crack in the trunnion had 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 Q1. With that replacement trunnion already on-site and the replacement work is currently underway and progressing well. Final repair works are expected to be completed in this quarter. This repair, in addition to other throughput improvements implemented by the team this year, means that there are limited impacts to production and the Macraes site Remains on track to deliver production guidance for the year.

Speaker 5

Now for Waihi. Waihi produced Approximately 15,000 ounces of gold this quarter, an increase from the 10,000 ounces produced in Q1. The significant rainfall we experienced in the Q1 subsided, and we were able to return to planned productivity levels and access high grade areas of the mine that were previously flooded. AISC was $16.14 per ounce, An improvement of 26% over the Q1 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.

Speaker 5

I'll now hand it over to Craig to provide an exploration overview.

Speaker 6

Thank you, Peter. Last month, we released exploration results from our infill drill program at the Whara Kiraponga project just north of Waihi. We continue to intercept exceptional gold and silver mineralization as we focus on converting resources to support the Waihi North Pre feasibility study next year. Drilling rates have been slow due to weather and additional time required on directional drilling, But I'm pleased to say that we received regulatory approval to add a 3rd drill rig to our program last month. The additional rig has commenced Drilling and is focusing on conversion of the northern section of the EG vein, where drill productivity is expected to be higher, contributing to our 8,000 800 meters of planned drilling on the project this year.

Speaker 6

We continue to actively explore across all four operations and we'll release exploration updates as results are available throughout the year. I'll now turn the presentation back to Jared.

Speaker 2

Thanks, Craig, and thanks, Marius, David and Peter. In summary, our second quarter was a strong one, and I'm Thankful for the dedicated efforts of the entire Oceania Gold team for delivering that. We remain committed to our goal to safely and responsibly deliver on the production and financial We are focused on continuing to safely and responsibly maximize the free cash flow generation of the company, and we've made good progress in our 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. And with that, I'll hand the call back to the operator and open

Operator

And your first question will be from Ovais Habib at Scotiabank. Please go ahead.

Speaker 7

Thanks, operator. Hi, Gerard and Oceana Gold 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 free cash flow? I mean, Q3 is supposed to be on the weaker side.

Speaker 7

So Do we think there's a little bit of a pause in free cash flow in Q3 and then kind of moving on to Q4? Any color you can provide on that?

Speaker 2

Thanks, Orest. 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 on a constant gold price basis, as We expect the Q3 to be the weaker one and then the Q4 to be stronger, well then the Q3 at least. So Yes, it will be pretty much follow the gold production profile for the year because you can see that the production profile, we're At the midpoint, the CapEx is on track and assuming we keep the costs in line with the production profile, all other things being equal, Q3 will be more like Q1 and Q4 will be more like Q2.

Speaker 7

Got it. And that's also assuming CapEx starts falling off in the Hale underground, correct?

Speaker 2

Correct. Yes. And then that might be supplemented by more

Speaker 7

Got it. And just maybe this is a question for David then. At Here, guidance is kind of looking to the lower end of guidance, the lower grades mined in Q2 at the Mill Zone. And now the Mill Zone 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 zone Q4 and going into 2024?

Speaker 7

And kind of what kind of grade profile should we expect going into 2024 as well?

Speaker 2

Yes. Thanks, Herve. So I will let David comment on that. But in the second half of the year, we've got a few things going on. As David said, we will transition to Leadbetter Stage 2.

Speaker 2

And as we saw when we were last in Leadbetter, its Performance against the model was much better than what we experienced in Mill Zone 2. And then of course in the Q4, we've got the first ore from Hale underground Coming into the mill. So that represents it's quite a dynamic second half for Haile. But David, is there any other color you want to add to that?

Speaker 4

Yes. Thank you, Gerard. So we're going to be feeding from pretty much the low grade stockpile in Q3 Before we start getting ore from lead better, obviously, at the beginning, we're going to get low grade ore. But once we start getting the underground and ramping up in 2024 the underground, we're going to get into a higher grade ore.

Speaker 7

Got it. And David, since I've got you on the line, you mentioned grade control drilling is progressing around the first production level at the Hill Underground. Have the results kind of been in line with your expectations?

Speaker 4

Actually, the grade control, the first hole that we drilled came a little bit higher than estimated than in the resource model. We just sent the samples for the 2nd hole Last week, so we haven't received those samples back yet. But it's coming very good, Tyler.

Speaker 7

Got it. Good to hear. Thanks for that, David. And then just switching gears to Didipio. The optimization study is looking like it's expected by the end of the year.

Speaker 7

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?

Speaker 5

Thanks, Yves. So, we're currently look, that is actually part of the study is How long will it take us to actually ramp up? What is the final sort of 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 that's what I'd expect ultimately the study to return in that order.

Speaker 5

But yes, it is looking positive so far, and we're looking forward to sharing those results.

Speaker 7

Okay. Thanks. And looking forward to the side trip as well in That's it for me guys and congrats on a good quarter.

Speaker 2

Thank you, Aves. I appreciate the questions as always.

Operator

Thank you. Next question will be from Cosmos Chiu at CIBC. Please go ahead.

Speaker 8

Hi. Thanks, Jared and team. Maybe first up on La Cray's. As we talked about the trunnion was Fixed, but it seems like now it has to be replaced at least a bolt. But it doesn't seem like it's going to impact Your full year guidance.

Speaker 8

Can you remind me maybe what the capacity is When both mills are 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 full year guidance despite some of these hiccups you've had with the 2020.

Speaker 2

Yes. Thanks, Cosmos. Great question. I'll let Peter answer it. But Macraes is a it's a really resilient operation and there's a Great story there of adaptation and performance and running what is a low grade mine and mill Very, very well.

Speaker 2

But Peter, do you want to have a go at that question?

Speaker 5

Yes. Thanks. I'll answer it. There's a couple of ways. Think there are a couple of questions in that.

Speaker 5

So the first repair we did flag temporary. We actually got a company in from the U. K. To do metal stitching, Which is common in cast steel structures. We certainly were hoping that, that would let us Basically operates through until the end of this year.

Speaker 5

But we're always planning on doing the planned inspections just to check. That planned inspection in late June identified that, that crack had lengthened. But when we did actually obviously, when we did do the temporary repair, We did 2 things. 1 is we bought we procured a bolt on trunnion, which would require us to cut the end off the current feed end And then replaced that with a bolt on. And we also procured a full feed in cast.

Speaker 5

We didn't obviously the repair didn't last and we're now in the position where we're going to install the bolt on trunnion. We've done the engineering, so the final element analysis, FEI, they It looks like that bolt on trunnion can be a permanent repair and it's progressing really well. So that's effectively a summary Of the repair. As far as the mill throughput goes, what we've seen out of Macraes over the last 3 to 4 months, there's been a number of mill throughput And these improvement initiatives that they've had underway. The results for Q2, if you look at the MD and A, 1,620,000 tonne mill feed, that's like a 6 5,000,000 tonne annualized rate.

Speaker 5

Historically, they've never actually hit 6,000,000 tonnes in a year. So, yes, those initiatives that the team have been looking at are really paying off. And that allowed Q2 to be a very good month, higher than what we're probably So we did claw back some of the deficit from Q1. We're now seeing in Q3, we'll give a little bit back. But by the time that Mill 2 repair is undertaken and the full the mill processing capacity is back, Then we'll see that those higher rates will continue.

Speaker 5

So we see that Q4 will be able to claw back and that's why we're confident that we can maintain guidance.

Speaker 8

Perfect. That's great. Maybe switching gears a little bit, going to Hale and following up on my buddy, my whole Basement questions. In terms of it seems like in Q3, you're going through some other stockpiles. I don't know if this is disclosed, but How much stockpiles do you have in terms of available and what's kind of like the grade?

Speaker 4

David? At this moment, we have about 2,800,000 tons of Low grade, stockpile, and the grade will be somewhere between 0.75 grams and 0.85 grams per ton.

Speaker 8

Okay. And then, David, as you mentioned, Millpit, that's coming to an end in Q3, but that's going to be Leadbetter is coming in, Phase 2 is coming in later on. I think in part Jared has answered my question in terms of the grade profile, But it seems like Millpit, some of the ore coming out was lower grade than That's it. But is there any kind of read through from that into Live Better as you go into Live Better? Any concerns in terms of grade?

Speaker 8

Well, as Gerrit mentioned, the model is always what felt better for Leadbetter, especially for Phase 1.

Speaker 4

So we have a Ledbetter 1, in Ledbetter 2, Ledbetter 1 actually performed really well compared to the model. So we're expecting the same performance on Ledbetter II and III.

Speaker 8

Okay. And then maybe the underground development, When I was on-site back earlier this year, it was already fairly well advanced. And so could you maybe remind us what Still needs to be completed to get 1st ore in Q4 and what are some of the key sort of key drivers here?

Speaker 4

So we're already starting the stops. So we're going to be well advancing to The decline getting to a 975 level, like we said before, we're about 80 meters from the 975. And once we get there, which is going to be early in Q4, then we'll just start mining the ore from those stops.

Speaker 8

Great. And maybe one last question. Jared, as you mentioned, in the MD and A, You're still on track to hit the $330,000,000 to $380,000,000 in terms of capital exploration expenditures for the year, but it sounds like For general operation CapEx, the $95,000,000 to $110,000,000 You want to come in at the lower end due to the dip deal and hail. I'm just wondering if that's A timing thing or is it cost savings or is it are we going to see higher costs kind of come back in Say in 2024, I'm just trying to get a better sense.

Speaker 2

No, fair question. No, it's not Any shift of expenditure from this year to next will be fairly minor in nature. And that's just due to our ability to probably execute on some of our plans that we probably tend to be a bit And I think that's not uncharacteristic of most companies in this industry. So it's just it'll just be the general So there's a bit of cost optimization, spend optimization and overall cost reduction in all that as well, Cosmos.

Speaker 8

Great. And maybe one last question here, talking about costs, and we had talked about this a lot Throughout 2023, are you finally seeing overall costs sort of abating? We're seeing inflation come up for the general economy. When I was on-site in South Carolina, certainly that was a point of discussion in terms of inflation. But are you finally seeing some of the costs Abating in some of the areas, South Carolina or anywhere else around the world?

Speaker 2

Yes, thanks. I'll let Marius 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 are lower, so that obviously feeds into lower diesel. Energy costs, The extension on contract can be can remain relatively elevated, but overall inflationary impacts have moderated across the industry to and Maris can I'll provide 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 that Delivery speed and or delivery risk has improved. 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.

Speaker 2

But Marius, just from a category perspective, any color you can provide Cosmos? Yes, sure.

Speaker 3

Hi, Cosmos. Just looking at it from a business perspective, we are seeing mixed impacts. It's not like you can have one size fits all. Where we're seeing increases Is in wage inflation and obviously with increased competition for talent and resources that's washing through our cost base. Also trending up are grinding media and reagents in APAC, in APAC region, other elements where we see it is electricity cost at Haile.

Speaker 3

And then from a volume perspective and let's call it activity level perspective, maintenance costs All going up in areas. We're seeing that at Haile with increased maintenance activity. Obviously, with Peter's repair Of the Mal-two, those costs are washing through. And then at Macraes, there is additional ground support costs That we're seeing as a result of some of the ground conditions on the underground. On the flip side, pleasingly, we're seeing double digit Increases in diesel and fuel costs and Reduction.

Speaker 3

Yes. Reduction decreases in diesel and fuel costs, Which is more impactful at open pit operations. We're seeing drilling consumables, explosives, freight costs, Those type of costs coming down and easing up. And even tires, although it's still at higher than the 2022 levels, Are we seeing that trending down? And lastly, New Zealand, we're benefiting from the weaker New Zealand dollar.

Speaker 3

And then with the increased mould feed, if we look at the unit cost rates, you can see that washing through on processing and G and A costs on the New Zealand operations. I think the last point, if I may, on the profile, it just again highlights the importance Of the programs we have underway where we're focusing on the 3 key value initiatives across asset management upliftment, Procurement excellence and also continuous improvement where we are confident that we are delivering sustainable long term value.

Speaker 8

Great. Thanks again. Congrats again on a very strong Q2. Looking forward to the rest of 2023 and

Operator

And your next question will be from Wayne Lam at RBC. Please go ahead.

Speaker 9

Yes. Thanks. Good morning, guys. I guess, first question, just wondering, Haile, with the water treatment plant now complete, Should we anticipate some level of unit cost savings with the reduction in dewatering required or improved treatment and 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?

Speaker 2

Sure. Yes, I mean, It gives us a lot more operational flexibility. And as you may have seen when you're outside, we had A temporary and hired water treatment plant, which we've kept for a little while longer to get well ahead of the curve there, but that obviously will save that cost. But This thing is more about operational flexibility and always being confident of being able to be in full compliance with Water Management. So it's David, anything else you want to add to that?

Speaker 4

Yes. Thank you, Lior. The idea is that this year, we're actually going to have a little bit higher cost because we're ramping up The water treatment to empty it and the water that we have in the pits. We'll see reductions starting probably halfway next year.

Speaker 9

Okay, great. Thanks. And then maybe just on the underground exploration, having started at Horseshoe, Are there additional drill platforms that are still planned 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.

Speaker 2

Great question, Wayne. I mean, Craig's online. I ask We're really excited about it. 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 materially give us a return on that investment, and I'm pleased to say that we are investing in exploration at Haile. We will release those to the market.

Speaker 2

But Craig, The activity level from an input perspective that's progressing well there, Tayo?

Speaker 6

Yes. Thanks, Jarrod, and thanks, Wayne, for the question. Activity drilling is progressing well. We don't have any results in on the resource drilling as yet, a bit to what David commented on the grade control drilling. We have a number of holes into the lab though already.

Speaker 6

I think we've completed Five holes and another one will be off to the lab next week. We're drilling from several platforms as development allows us. Currently, we're drilling from one platform for the resource drilling, but things are progressing well. Productivity is good On the rig in terms of meters per shift, so yes, the program is going as expected, if not a little bit better.

Speaker 9

Okay, great. Thanks. And then maybe just last one for me. Emma Craze, did you guys have an estimate The length of downtime for the 2nd ball mill. And then, just wondering if you might be able to expand a bit on the mill optimizations.

Speaker 9

What's the targeted run rate there going forward with the improvements that you guys have implemented? Is that still around the 6,000,000 tonne level or should we be

Speaker 5

So as far as the mill throughput, so we have looked at if you look at the Q2 results of $1,620,000 for the quarter, That's approximately 6,500,000 tonne annualized run rate. I think that's probably about what we really want to be able to deliver on an ongoing basis. So That will give you some indication of what we're striving for. And as far as the I guess The first question was around a ton per hour, was it from a mill throughput?

Speaker 9

Around the estimated length of downtime for the ball mill.

Speaker 5

Sorry, Ed. So the actual trunnion is on-site at the moment. The bolt on trunnion is on-site. We actually have the contractors on-site. We've cut the old trunnion off the ball mill.

Speaker 5

So it's already been jacked and set up and the old trunnion cut off. We've Got the Gs set up and we'll start machining early next week. So that what we're saying is by the end of Q3 Because it is work that there could be some challenges, but it's progressing really well. If things go as planned, That type of work should take no more than another 4 weeks. But because it's obviously work that It can be challenging.

Speaker 5

We're giving ourselves a full quarter.

Speaker 9

Okay, great. Thanks for taking my questions and good luck with the months ahead.

Speaker 2

Thanks, Wayne. And just to before going to Next was just to round out on Macraes. I just think it's a real call out for the June quarter for that team. I mean that milling rate is well above what they've historically been Their grade is lower, their recoveries are higher. That's for a low grade operation, that's a fantastic combination and they continue to pull Or out of the ground at from the open pit, especially at what I think is industry leading rate.

Speaker 2

So I think Macraes Producing the volume it does at the all in sustaining cost it does, it was, as I said in the call, a nice A window into what its potential is when it's running well. Sorry, operator, next question.

Operator

Thank you. Next question will be from Mike Parkin at National Bank.

Speaker 10

Hi, guys. Thanks for taking my call and congrats on the good quarter. Just a couple of housekeeping items. Just I may have missed it, but the Macraes repair costs, those will be capitalized, non expensed?

Speaker 2

That is correct. Yes.

Speaker 10

Okay. And then while you're running for the 2 to 3 months on 1 ball mill, Are you is it exactly kind of 50% of capacity? Or are you able to push it a little more even though you're running one line?

Speaker 5

Yes. So even this month, we've been able to demonstrate higher throughput rates than we probably had traditionally seen on the back of those Throughput improvement projects. So the actual impact is approximately Yes, we're running still at a 75% type capacity, between 70% 75%, which again, assuming that we're down for a quarter, Yes, it still allows us to be comfortable that guidance can be met. So we are still seeing those improvement Initiatives flowing through even though Mill 2 is down. Obviously, when Mill 2 comes back up, then we can continue to run at those higher throughput rates.

Speaker 10

Okay. And are you taking advantage of that line being down in terms of any other preventative maintenance? That's okay. If the IR team can maybe just follow-up with me, 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?

Speaker 2

Short answer is there are other shutdowns. I know why he has a milk shutdown underway at the moment and they are scheduled during the year and That profile of shutdowns is one of the variables that's contributing to our guidance for Q3 to be the weakest and Q4 to be Another strong quarter. So yes, there are shutdowns from time to time. I've just reminded Mike and not so much for you, but everyone on the call, whilst we say 1 Ball Mill 2 is down. We actually have 4 mills at Macraes, 2 SAG Mills, 2 Ball Mills.

Speaker 2

So when Peter said, you've kind of got you're running at 75%, you've got 75% of the million capacity there, which the reasons that he also said, we've been able to operate the overall complex Better than before. So it's headlined loss of capacities less than what a P stocking might have otherwise been.

Speaker 8

Can you

Speaker 10

actually run the other SAG and just bypass the ball?

Speaker 7

Yes.

Speaker 10

Okay. No, that's interesting. Okay. Thanks very much guys. That's it for me.

Speaker 2

Thank you, Mike. Appreciate the question.

Operator

Thank you. And your next question will be from Farooq Hamid at Raymond James. Please go ahead.

Speaker 11

Hi, good morning, everyone. So So lots of operational questions on this call. So maybe I'll ask a strategy question. Jared, it's for you. So look, the They've come around and this was a good quarter and it's good to see all the operations kind of running kind of the way that they can.

Speaker 11

So assuming that Hill underground kind of goes as per plan and you're into the production in the Q4 and the gold price you talked about the gold price earlier, the gold price stays 1900 If we look out 2 to 4 quarters and you're kind of running as expected, Jared, what do you see as a strategy at that point For the company, like what would you like to do at that point? Are you kind of just looking at the expansion you're seeing at Haile and the Increased production and then maybe WKP in a few years? Or is there kind of another leg here for you in terms of maybe adding another asset, Whether it be kind of a development asset or a production asset, what do we expect for the strategy from Oceania over the next, let's say, year?

Speaker 2

Thanks, Farooq. Yes, look, I mean, that future you paint is the one we want to be heading to, right? So operations delivering to potential, generating a lot of cash. You can expect that, as Marius alluded to, we'll further reduce the Debt that we have, we don't have much debt, but we can get it lower. Debt costs more now than it used to.

Speaker 2

You went back to paying dividends. There always is the option to increase Dividends. We have growth opportunities around the business that we'd love to prosecute. We have Exploration upside potential at all sorry, at least 3 of our 4 assets that we're putting money into. And that organic growth that we have in the portfolio that Peter speaks about at Didipio, we've got an ore body there open at depth with the potential to increase the mining rate.

Speaker 2

The leverage value of that is enormous. The potential for us to find more gold at Haile Underground, increase the Haile Underground mining rate that adds more value. I think we're in the business of 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 to exploration. We've got Land packages, particularly in the Philippines, outside of our existing mine operating area and so we can And then, yes, as we strengthen and as we get the confidence of the investment community, there's always the ability to look outside the portfolio.

Speaker 2

But in the very near term, our focus is on maximizing the free cash flow generation

Speaker 11

Okay. Thanks for that. So maybe to paraphrase what you said, What we should expect is a focus on internal growth opportunities as opposed to external growth. Is that fair to say that that's the priority?

Speaker 2

Well, that's what we have on the slide that you're looking at on screen right now. That's how we think about it. I mean, obviously, we have to be Mindful of opportunities outside of our portfolio, they could present from time to time. Our ability to take advantage of that It's perfectly correlated with our continued strength balance sheet, strength operating performance. So we have a very small Business Development team and that's not a reference to their height, but in number of people.

Speaker 2

And their job is to scan and make sure that we're Appraised of opportunity we can take advantage of. That's also what we have to have an eye to. So I'm not so Binary is saying it's in or out, but I'm leaving hopefully people with a very clear expectation today. Our very near term focus is on running the business we have very, very well.

Speaker 11

Okay. No, thanks for that. And then maybe the last part of this Is, assuming that you do see some external opportunities that are attractive,

Speaker 9

are

Speaker 11

there certain Like things like cash position or debt position or cash flow profile or anything like that. Is there any Internal targets that you have that you want to hit before you look externally?

Speaker 2

Internal targets. Sorry, not really. Farooq, I mean, if I understand the question right. So, no, we have I mean, we've got the balance sheet now down to You have a pretty strong position. Our leverage ratio of 0.34 times is low.

Speaker 2

We don't have an aspiration per se to be net cash, But it's a great spot to be. These things have a temporal dimension. You can be We don't fixate on any one point in time. As to what the attributes of the anything that we look at, obviously, And this is the hardest thing in our industry when you start doing inorganic growth is making sure that anything that we do add to the portfolio is accretive In value to the Oceania Gold shareholder, that's the thing that we'd be looking for. I mean, it would be Nice to have another asset in the portfolio and nice to have 2 more assets in the portfolio.

Speaker 2

But in the journey to getting there, obviously, our preference would be to find it Through the drill bit and Craig's efforts, early stage entry with junior companies and But we obviously have to deploy any acquisitions funding to those things. We've got to make sure that we get an asset that we believe can Run well, we can run better than the previous owner, which is actually a lot harder than it sounds Andor has exploration upside and making sure that we buy it at a price and can convert that potential to the betterment of the Oceana Gold shareholder. So that's the lens we look through it, but 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 and we can take that time to continue to prove that we can run well what we have, strengthen the balance sheet to put us in an ever better To make those kind of decisions.

Speaker 11

Okay. All right. Well, thanks for that, Jared. I appreciate the insights.

Speaker 2

Thank you, Farooq.

Operator

Thank you. And at this time, it appears we have no further questions. Please proceed with any closing remarks.

Speaker 2

Well, thank you, operator, and thank you to the team here, everyone at OceanaGold, but also all 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 Oceania Gold, Wish you a very pleasant rest of the day.

Speaker 2

Bye for now.

Operator

Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending.

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Earnings Conference Call
OceanaGold Q2 2023
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