OceanaGold Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 10 speakers on the call.

Operator

Good day, ladies and gentlemen, and welcome to the Oceana Gold Corporation Q2 2024 Earnings Conference Call. At this time, all lines have been placed on hold. Also note that the call is being recorded on Wednesday, July 31, 2024. And I would like to turn the conference over to Rebecca Hanari. Please go ahead.

Speaker 1

Good morning and welcome to OceanaGold's Q2 2024 results webcast and conference call. I'm Rebecca Hanari, 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 and Peter Sharp, Chief Operating Officer, Asia Pacific. 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 and A session.

Speaker 1

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

Speaker 2

Thank you, Rebecca. Good morning, everyone, and thank you for joining us today. The first pillar of our corporate strategy is to safely and responsibly deliver gold production. I'll start off by acknowledging that we did not do that this quarter because one member of our Didipio team, Christopher Magistino, did not go home to his family. This was Oceania Gold's only fatality since 2016 and Didipio's only fatality since 2012 before it started production.

Speaker 2

This loss has been profoundly upsetting to all of us at Oceania Gold, particularly for Christopher's friends and colleagues at the Didipio Mine and ultimately, greatest to his family and local community. Preliminary findings of the investigation indicate that he fell from heights while completing a work related task in the paste plant area. Operations were suspended for about 24 hours while the area was secured, and crews were notified. The pace plant where the incident occurred remained shut down for about a week. We continue to drive for a safe workplace across all our sites, particularly in the wake of this tragedy, and continue to implement our key safety programs, namely Our Safe Pavers and Stop and Think.

Speaker 2

Keeping our workforce safe remains a critical focus for all of us, and we are making it clear to our workforce that the only work we want is safe work. We have a number of other actions being implemented or considered in this never ending pursuit of 0 fatality or life altering injuries. From a production perspective, we produced just over 98,000 ounces during the quarter. And despite a weaker than expected quarter at both Didipio and Waihi, we expect to deliver our 2024 consolidated guidance with production strongly pack half weighted, as we outlined at the beginning of the year. In the first half of the year, our focus was on waste stripping at our 2 open pit mines, Haile and Macraes, to allow us access to higher grade ore.

Speaker 2

I'm pleased to say that Haile reached ore in Phase 2 of the Leadbetter pit in May, and we expect to reach ore in Phase 7 of the Innis Mill pit at Macraes in this current Q3. At the same time, we've been ramping up production of the Horseshoe Underground Mine at Haile. And this month, we achieved target production run rates of around 2,000 tonnes per day. We were free cash flow positive in the quarter, assisted by the proceeds from selling the noncore Blackwater asset. We also successfully completed the initial public offering of Oceania Gold Philippines, the subsidiary that owns the Didipio mine, we listed the Oceaneagle Philippines on the Philippines Stock Exchange.

Speaker 2

The proceeds of this offering, which we do not include in our free cash flow number, in combination with the quarter's free cash flow, put us in a net cash position at the end of the second quarter. We also continue to deliver on the capital allocation framework outlined at our recent Investor Day with progression of our attractive growth options, a strong balance sheet and a focus on returning capital to shareholders. We declared our latest $0.01 per share semiannual dividend and recently introduced a share buyback. This slide shows how we're tracking compared to our guidance ranges. As outlined when we set guidance at start of the year, production was expected to be 60% back half weighted.

Speaker 2

We've reduced just under 40% at the midpoint of guidance in the first half, reflecting weaker production from Didipio and Waihi. But we're expecting a stronger second half to deliver our consolidated production guidance. In addition to open pit ore sources coming online at Haile and shortly Macraes, we expect Didipio to have an improved second half as well, driven by progressive sequencing of the high grade breccios stopes and an increase in underground ore tonnes hauled with the addition of new mining equipment on-site. Increased production from Didipio will also result in higher copper production in the second half of the year. From a cost perspective, our first half outcome was above our all in sustaining cost guidance for the year.

Speaker 2

The major driver for this is mostly due to lower ounces produced in the first half, and we expect unit cost to come down across the remainder of the year as production increases. Capital projects remain on track for the year, including open pit stripping and TSF expenditures at Haile and Macraes, continued capital development at Horseshoe Underground at Haile, and ongoing permitting and study costs at WKP. I'll now turn the call over to Marius to discuss our financial highlights for the quarter.

Speaker 3

Thank you, Gerard, and good morning, everyone. During the Q2, we generated $251,000,000 in revenue on the back of record average realized gold prices. AIC for the Q2 was slightly over $2,100 per ounce. The increase was mainly related to lower gold sales across all operations, lower copper credits at Didipio and higher maintenance spend to improve reliability at Haile and Didipio. This was partially offset by less reliance on lower grade stockpiles at both Haile and Macraes.

Speaker 3

Our free cash flow in Q2 was $31,000,000 which included the sale of the Blackwater project. Adjusted earnings of CAD0.04 per share was in line with analyst consensus estimates and operating cash flow was CAD0.14 per share. With the net proceeds of $100,000,000 from the Depio IPO and the $50,000,000 from the sale of Blackwater, we entered a net cash position of CAD50 1,000,000 at the end of the second quarter, which is mainly made up of our available cash less drawn bank debt of CAD125 1,000,000 As outlined at our recent Investor Day, our capital allocation framework is clear. With a strong balance sheet, we want to be able to fund our attractive growth options and increase returns to shareholders. In line with that framework, the board declared a $0.01 per share semiannual dividend and in July, we announced a share buyback program to buy back up to 35,000,000 common shares, representing approximately 5% of our shares outstanding.

Speaker 3

We are expecting a much stronger quarterly production profile throughout the second half, and combined with the current gold price environment, we anticipate strong free cash flow generation for the remainder of the year. The free cash flow profile, coupled with our strong balance sheet, sets us up to continue generating shareholder value. I will now turn the call over to David to discuss the Hayel operation.

Speaker 4

Thank you, Marius, and hello, everyone. Safety remains at the forefront of our minds at Haile, and we are committed to identifying and eliminating hazards and unsafe behaviors as part of our company wide programs to ensure our workforce calls home safely. Coal production at Haile in the 2nd quarter was approximately 38,000 ounces. At the start of the quarter, mill pit was comprised of portioned ground ore and low grade open pit stockpiles. In May, we began accessing ore from Phase 2 of the Lebeder open pit, displacing ore from the stockpile to the mill, and we'll continue mining ore from Lebeder Phase 2 through the remainder of 2024 and into early 2025.

Speaker 4

With Phase 2 pre stripping now complete, pre stripping will continue in Ledbetter Phase 3 as part of the mining sequence for 2025 and beyond. Production during the quarter was impacted by an 8 day plant maintenance shutdown at the mill, resulting in lower throughput as well as by harder than expected open pit ore encounter in the upper benches of LeadBread Basin 2 open pit. We are addressing this hard ore by increasing blast fermentation through tighter blast patterns, evaluating additional crushing capacity, and optimizing the pit blend. We expect costs to come down in the second half of the year as production increases. Now from an exploration perspective, our drills were focused on defining a potential new resource at Horseshoe Extension, converting resources at Horseshoe at depth, and our surface drills continued at Ledbetter Phase 4 and our other regional targets.

Speaker 4

I'm pleased to say that as of today, the underground ramp up at Horseshoe is complete, and we are now mining at target production rates. Increased development rates in the first half of the year resulted in more headings and allows us to draw from 2 stops at all times, having a first stop in process. This drove underground production rates to an average of 2,000 tons per day, starting at the end of July, in line with plan. I'm very proud to deliver the horseshoe underground into pulp production and on schedule, and this, in combination with a better open pit or pit, positions us for a strong second half to deliver our 2024 guidance. I will now turn the call over to Peter to discuss the DPO and our New Zealand assets.

Speaker 5

Thank you, David, and good morning, everyone. I'll first echo Gerard's comments earlier regarding the loss of our colleague, serious injury at Didipio when last week a contractor sustained head injuries while attempting to remove a metal blockage from a jaw crusher. He is currently in critical condition in the hospital and the investigation into this incident is underway. With 2 serious incidents recently at Didipio, our commitment to ensuring that everyone goes home safely to their families and all of our operations is more steadfast than ever. At Didipio, we are increasing the level of infield coaching for the Our Safe Behaviors program, as well as increasing infield verification of critical controls of high risk tasks.

Speaker 5

Our people are our most important asset at OceanaGold, and nothing is more important than ensuring they go home safely at the end of their workday. From an operational perspective during the quarter, Didipio delivered 2nd quarter gold production of approximately 23,000 ounces and copper production of 2,800 tonnes. Production was lower than the previous quarter as the process plant experienced a number of unplanned maintenance shutdowns, which impacted throughput. Grade mined from underground was also lower in Q2, impacting total production, due to the resequencing and redesign of the high grade Breccia stopes. The impact of the redesign is smaller stopes and some deferral stopes into the second half of twenty twenty four.

Speaker 5

However, the value that we get is high recovery and lower dilution of these high grade ore tonnes in the medium to longer term mine schedule. Mine tonnes were in line with the previous quarter though, and we expect this to increase throughout the year as we add additional working phases and new underground equipment to increase the mining rate. This is in service of our goal to increase the underground mining rate to 2,500,000 tonnes per annum and is part of the ongoing pre feasibility study that is on track for delivery in early 2025. We are currently still expecting to meet 2024 guidance, albeit at the lower end, and we're also forecasting costs to come down throughout the remainder of the year's production and gold sales increase. Macraes delivered the plan during the quarter and produced approximately 27,000 ounces of gold.

Speaker 5

Continued operating excellence in the mill resulted in another quarter of record throughput. The feed was largely from low grade stockpiles as waste stripping continued in Phase 7 of the Innis Mills open pit. We expect to reach ore there this quarter, which will displace the stockpile material in the mill feed for the remainder of the year and bring the head grade up. Access to ore in Innis Mills will drive stronger production for the second half and positions us to deliver on our 2024 guidance, with production approximately 55% back half weighted in line with plan. In our efforts to assess opportunities for additional mineralization in Macraes that could be economic at these higher gold prices, we've scheduled an additional 6,500 meters of drilling at site to target resources outside of the current life of mine pit shells.

Speaker 5

Waihi produced just over 10,000 ounces of gold in the quarter, which is roughly in line with what we produced in Q1. We did anticipate an increase in production in Q2, but continued to encounter geotechnical issues in the remnant mining areas that prevented us from establishing crown pillars in certain stopes and caused us to pivot to mining stopes out of sequence. We've engaged an external geotech consultant to assist in reviewing the design and installation methods for establishing crown pillars in these areas and hope that the outcome can provide a longer term solution and allow us to increase our compliance to the stope sequence in the mine plan. Advancement of the Waihi North project, which includes WKP, remains on track with the pre feasibility study expected by the end of this year. During the quarter, we progressed diamond drilling at WKP, targeting continued resource conversion and growth of the EG vein and expect to share further results with the market later this quarter.

Speaker 5

I'll now turn the call back to Gerard for closing remarks.

Speaker 2

Thank you, Peter. We remain committed to creating a safe and sustainable workplace and will drive further review of and training through our 2 key safety programs to ensure everyone goes home to their families. We expect to deliver on our 2024 guidance with production a little more than 6% second half weighted, and all in sustaining costs are expected to decrease in line with this increase in production. Our balance sheet is strong, with the company now in a net cash position, and we continue to progress our growth options and deliver on our commitment to increased returns to shareholders with our existing dividend and now the share buyback program. We look forward to providing further updates on the results from our exciting exploration targets across the business throughout the year and on delivering the WKP PFS by the end of the year.

Speaker 2

I'll now return the call to the operator and open up the line for any questions.

Operator

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

Speaker 6

Hey, thanks. Good morning, guys. Just wondering at Didipio, if you could kind of clarify on the stoping redesign there. Have you seen a change in ground conditions that necessitates reevaluation of the mining methods or re sequencing of the mine plan there? And does that have any broader implications for a future ramp up underground if you move forward to support the expanded mill capacity?

Speaker 2

Thanks, Wayne. Peter?

Speaker 5

So Wayne, no, we haven't seen changed ground conditions. What we have been experiencing when we've been mining the Breccia stopes has been challenging ground conditions. So we've got one of the things about Didipio is really healthy is we get big stopes, we've got 20 by 20 by 30 meter stopes. But the, I guess the weak nature of the Breccia material, what we're finding is that, when we're looking to mine larger stopes in Breccia, we're seeing failure in the shoulders and the roof, and we're just not getting the full recovery of those stopes. So what we're looking to do is redesign with smaller stopes.

Speaker 5

It will result in a smaller what we call a hydraulic radius, which means the span is smaller, which means it's got a greater chance of staying open and we can then pace fill cleanly and ultimately gives us greater certainty around resource recovery. So what it does about smaller stopes means you're not going to mine as many tonnes as fast. We do have that benefit in the Monzonite area, but in the Breccia it just means that the mining cycle will be slower. So it probably just spreads out over the next 2 to 3 years, our ability to mine at that previous rate, in the breccia zone. So from a long term perspective, it's a benefit.

Speaker 5

From a mining ramp up perspective, it'll be a benefit. So all of the PFS work that we're doing, probably on the back of that, the design change was made. So that in summary is where we're at. I think while it's going to take a short term hit, from a long term perspective, it will be an overall benefit.

Speaker 6

Okay, great. Thanks. And then maybe just curious on the harder ore experience at Haile this quarter. Was that from the Ledbetter pit? I'm just trying to understand if the higher grades from Phase 2 will be partially offset by lower throughput as we think about the back half of the year?

Speaker 4

David? Yes. So the afterload is exactly coming from the better 2 in the upper benches that we said. We're also getting higher grade, which as you said, is going to offset the lower throughput that we're actually having right now. But at the same time, we are testing some new spacing and drill bits sizes in Leadbetter to make sure that we don't lose too much throughput, but also improving optimizing our blend.

Speaker 6

Okay, great. Thanks. And then maybe just last one for me. In terms of guidance for the year, you guys have been fairly consistent in messaging the 60% weighting in H2. But the incremental commentary had previously been expect a steady improvement through the year with Q2 better than Q1 and then a further ramp up into the back half.

Speaker 6

Given some of the operational challenges encountered this quarter, do you view the cost guidance is still being achievable given the big decline in cost need to get there in the second half?

Speaker 2

Thanks, Wayne. Yes, sure. 2 questions there. 1, yes, we do expect the second half to be stronger and that it's a step ladder effect up as with Q3 being stronger than Q2 and Q4 stronger again. And cost guidance is expected to be achieved.

Speaker 2

Like most mining companies, you have a fairly significant degree of fixed costs and the benefit of that higher grade and higher volumes absorbs a lot of those fixed costs and we remain of the view that our all in sustaining costs will come inside the guidance range by the end of the year.

Speaker 6

Okay, great. Thanks for taking my questions.

Speaker 2

Thank you, Wayne.

Operator

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

Speaker 7

Thanks, Jared and team. Maybe on your guidance as well, Jared, given what you've done in the first half, and I hear you that 60% of the production is going to be in the second half. Is it more realistic that you're now targeting the lower end of guidance for the year for production and the higher end for cost?

Speaker 2

Hi, Cosmos. No, we don't target the lower end. We're targeting achieving the guidance. And just to point out that the as Wayne said at the start, we kind of said it was going to be around 6040 At the end of the first half, we're 38 point something of the 40. So it's a little off.

Speaker 2

And we're a little off in those driven by lower than expected performance from 2 sites. And they happen to be our 2 smaller sites, Waihi and Didipio in a production sense. They represent around a little over a third of our production. So the big engines performed well, that's Macraes and Haile and we're expecting them to perform even stronger. So if that continues and not putting any pressure on Macraes, I mean quarter on quarter, it's getting these fabulous million rates.

Speaker 2

Now we're going to get higher grade ore into it. Haile, as David and our materials have said, is into good ore, both open pit and underground. That grade is king and the benefit of that gives us a belief that we'll be able to achieve the guidance. We don't target the lower Obviously, when 2 assets are at their lower end of guidance, arguably puts pressure, but we kind of factor those judgments in when setting guidance overall. But no, our goal remains to hit guidance.

Speaker 7

I only ask is if I take your first half production divided by 0.4 ish, I get to something very close to the lower end of guidance. So maybe I'll rephrase it. I think you'll hit at best the low end of guidance. But to your words, that would still be within guidance. Maybe another question here in terms of the 2 underperforming assets, Jared.

Speaker 7

As you mentioned, Didipio and Waihi, both have had geotechnical issues. It sounds like you have a solution for Didipio, and they will do better in the second half. How about Waihi? The reason why I asked is geotechnical risk is always challenging, geotechnical issues are always challenging. So what's the best case scenario here in terms of Waihi?

Speaker 7

And then maybe if you can talk to how much of your ore is actually coming from fresh ore versus remnant ore? And is there a way that maybe just mine from the fresh mining areas? Would that be a potential alternative?

Speaker 2

Great questions, Kos, I'll hand over to Peter.

Speaker 5

Yes. Thanks, Kos. So the question around Remo Mining in Waihi, the challenge we have, I mean, the challenges around the establishment of the competent crown pillar. In the remnant areas, we actually need to establish a, a crown pillar, which is effectively a stable, roof over the top of the stopes that we want to mine so that we can safely mine the stopes beneath, because we do undertake a top down mining sequence. Now in the remnant areas to establish a competent crown pillar, we've got to mine out all of the old remnant fill and failed material previously because we just don't know the condition of that material.

Speaker 5

So we have to mine that out and then we have to refill it with competent material and we fill it with cemented rock fill or CRF. And what we're finding that in addition to the CRF, we're actually having to install spiraling rods drilling in through the CRF. You have to drill it in from the footwall or the hanging wall and then we have to grout or resin inject to ultimately create an engineered crown pillar that we can safely mine beneath. And it's been a bit of, I won't say trial and error, but fundamentally we've done that. We've learned that we have to get to that point, and that's taken quite a number of months, remembering that this is new for us in wide mine into these remnant areas.

Speaker 5

So we are now starting to see that we've got the design that is now holding up And that will allow us to obviously be better at our stope sequencing compliance, which means we'll mine the areas that we're saying we're going to mine. It has meant that we've just had to learn what is the process and the mining cycle to be able to get confidence that we can safely establish those ground pools. So I think what we've seen is we've seen that we've had to effectively learn how to create those safe geotech conditions so that we can mine. The remnant area is very important to us. I'd say over the last 6 months plus, when we haven't been able to mine the remnant areas, we have been going into the fresh ore or the fresh zone areas.

Speaker 5

So we've effectively chewed up a lot of the inventory that we had in the fresh areas. So making sure that we do mine in the remnant areas is important. We have 40% to 50% of remnant mining for the rest of the year and it is higher grade. So it is important. But again, the positive signs is we actually now got a design.

Speaker 5

We're starting to see that the design and the execution is working and we're actually maintaining a safe crown pillar. So we certainly expect the second half to be a better performance in the first half. Hopefully, that's answered your question.

Speaker 7

Yes. That's good to hear, Peter. Thank you. And then maybe one last question on your CapEx budget for the year. I noticed that you did a bit of a switcheroo, I guess.

Speaker 7

Sustaining CapEx was previously $150,000,000 but now the new guidance is 110 and pre stripping or stripping was 110 and now 150,000,000 dollars That kind of makes sense given what you've spent on, say, stripping $86,000,000 year to date. But my question is, is this really just a reclassification of the same work? Or is it really are you doing more stripping this year versus what you have planned? And inversely, the CapEx, sustaining CapEx that you're not spending this year, is it going to come up, say, next year?

Speaker 3

Hi, Chris. It's Marius here. From a reclassification perspective, no, it's not a reclassification as such. We're not bringing any CapEx forward from next year. All that's happening is there's some activity that is classified that relates to stripping, that's longer term, that relates to growth.

Speaker 3

Other than that, from a total perspective, we still expect to be in line with the guidance. And you would have seen actually from a year to date perspective, we're heading down that track. All activities that we plan to do this year is on track as per the plan.

Speaker 7

Great. So in that case, the sustaining CapEx, the decrease in sustaining CapEx guidance from $150,000,000 to $110,000,000 is the $40,000,000 going to show up

Speaker 8

next year

Speaker 2

then? Not driven by production stripping, because if I go back to your earlier question, those campaigns are on track.

Speaker 7

Okay. Okay. Good. Thanks, Gerard and team. Those are all the questions I have.

Speaker 7

Thank you.

Speaker 2

Thanks. Thank you, because.

Operator

Next question will be from Hovis Habib at Scotiabank. Please go ahead.

Speaker 8

Hi, George and Oceana Gold team. And a lot of the questions I've had have been answered. Just a couple of questions from me. At Didipio, just following up to Wayne's kind of first question. Maybe I've missed some of the answers.

Speaker 8

But again, in terms of accessing those higher grade breccia stopes at Didipio, Will you be able to access those in Q3? Or is this kind of a spillover into Q4? Any sort of color that you can provide on that would be great. Peter?

Speaker 5

Hi, Amais. So we can still access the breccia stopes, but what we've done with the redesign by actually making them smaller stopes. And we're doing that again because from a geotech perspective, we know that the smaller stopes means that there's a higher recovery certainty. We're still accessing the retro stopes and still mining, but it's because it's smaller stopes, we're not as productive and it's taking longer, which means the total tonnes that you can mine in a certain period is not as much. So it's almost like our original mine plan the 1st 2 to 3 years.

Speaker 5

We got in and we mined all of the high grade stopes in Breccia area, which is up into the top of the mine. What we're seeing now is a bit of a flattening of that. So we're still mining all of the Breccia area, but it's just going to take us, a year or 2 longer. What we plan to do, because obviously that will drop the average mine grade slightly over the next couple of years. What we plan to do obviously is mine at a much higher mining rates.

Speaker 5

So we've talked about the underground optimization, taking the mine to 2,500,000 tonnes. By getting up to that rate, we'll more than offset through extra total tonnes mined, the slight reduction in average grade by just having the slower rate through the breccia zone. So, yeah, again, from a longer term perspective, we see this is in actual fact a positive because we'll get a higher recovery out of the Breccia area.

Speaker 8

Okay. Thanks for that. And in addition, you did bring in some additional equipment or you're looking to bring in additional equipment. Is that kind of according to plan as to your increasing down to ground production from underground and or kind of resequencing of the stopes?

Speaker 5

Yes, absolutely. So we've I think we've shared previously that even though we're actually undertaking the pre feasibility study this year, we're actually gearing up to ramp up. So in parallel, we've actually been onboarding additional equipment and we do expect to be exiting this year at a mining rate in and around that 2,000,000 tonne per annum. So we're looking to mine and actually increase our mining rate and get to that 2,500,000 tonne mining rate as fast as we possibly can.

Speaker 8

Okay, perfect. Thanks for that, Peter. Just moving on to Haile then, maybe this is a question for David. In terms of achieving the 2,000 tonnes per day from the Horseshoe underground in July, Is that a sustainable rate that you're expecting going into Q3, Q4?

Speaker 4

Good morning, Ovais. Yes, right now we're going to be mining 2 stops at any given time with a third being processed, drilled, etcetera. So we expect to be mining an average of 2,000 tonnes per day for the remainder of the year.

Speaker 8

And David, thanks for that. And just on that, I mean, in terms of the second half, any sort of color on grade profile that we should be expecting in the second half?

Speaker 4

Yes, we've seen an increase in the letter through. So that we expect that grade to continue to also in Lebedere2. And the underground, the grade that is coming is exactly what we predicted in the model. So what we see is what we expect to see.

Speaker 8

Okay. Thanks for that, David. That's it for me guys. Thanks for taking my questions.

Speaker 2

Thank you,

Operator

And your next question will be from Farooq Ahmed at Raymond James. Please go ahead.

Speaker 9

Hey, good morning, everyone. I just wanted to follow-up on Didipio again. Obviously, there's been a lot of discussion already. I just want to understand, you're going with these smaller stopes in the brecciated areas. Is that like how do you see that impacting the cost, the mining costs at Didipio going forward while you're for the next couple of years while you're kind of running these smaller stopes?

Speaker 9

You've maintained your guidance for the year, but can you talk a little bit about what you expect in terms of mining cost impact from the smaller stopes?

Speaker 4

Adam?

Speaker 5

Yes, sure, Farooq. The actual cost is that we don't see that it's going to be a significant impact. It'll be absorbed in the ramp up to a higher mining rate. Majority of our stopes are all 20 meter by 20 meter by 30 meter in the Monzonite area. The Breccia zone is more of a higher grade ore body in the higher lifts of the actual ore body itself.

Speaker 5

So we really don't mind many tonnes out of the Breccia anyway. The majority of our stopes are mined down at the moissanite and they will be maintained at those higher productivity levels. There will be some costs associated with the smaller stopes, predominantly just with the cycle and the pace fill. So smaller stopes mean that you'll need to build pace walls and then backfill and then mine another slot. So there will be some, but it won't have a material impact on the overall mining costs.

Speaker 5

And again, as we see the overall mining rate increase, all that will be absorbed. So we actually see that the mining unit rate will reduce over time.

Speaker 9

Okay. That's good. And then maybe just following up with the new equipment that you've brought in underground at Didipio. Does that new equipment is there any issue from a sizing perspective as it relates to potentially these smaller stopes? Is it still appropriately sized for kind of your redesign?

Speaker 5

Yes, it is. The actual draw point is not going to change. So the size of the loader that will mine the stope, it's actually the shape of the stope. So we'll be going from a 20 by 20 to 30 to a 20 or a 15 by 5. So what we're trying to do is reduce the span that is open at any one time because again in this weaker monsoil material, we're seeing fails in the shoulders and the backs or the roof.

Speaker 5

And we want to just make sure that we don't have as big an opening at any one time, then we'll backfill it with paste and then we'll go to the next stope next door. But the actual equipment itself, none of that will be impacted at all.

Speaker 9

Okay, good. And then maybe just lastly on Didipio. So you talked about the redesign, but then you've also mentioned resequence. Can you just talk a little bit about what the resequence entailed and why you had to do a resequence?

Speaker 5

Yes. It's just fundamentally what I said earlier around because it is a smaller stope and the actual mining cycle means that your I guess the productivity levels will be slower. You just can't mine as many tonnes in a certain period. So what it's doing is, rather than probably mining at all in the 1st 2 to 3 years, all the Breccia high grades gone in 2 to 3 years, it's adding another year or 2 to the overall shape. So you're flattening it over those 2 to 3 years, but you're extending it into year 3 year 4.

Speaker 5

So that's all that means is it's not the fact that we can't mine in particular areas because it's a smaller stope. It just means the cycle time is a little bit longer, which means you just can't mine as many tonnes in a certain period.

Speaker 9

Okay, understand. Thank you for that. And then maybe just switching to Hill, Really the question here on the underground, David, you talked about kind of reaching the 2,000 ton per day steady state in July from operating 2 stopes at the same time. And it sounds like a third on standby or ready to go as you switch out. Can you just talk a little bit about what your forward development is?

Speaker 9

How far is your development in advance of where your mining rate is or where your mining is right now?

Speaker 4

Yes. We're mining in the 950 and 975 levels, and the development decline is down at the 900, we already passed the 900, so we're 50 meters ahead, so we're very good on the development. So we've overpaid almost 12 months ahead of the mining.

Speaker 9

Okay, that's good. And then maybe last question for me, where obviously based on your guidance 60% to 65% of 2024 production at Haile is expected in the second half. And that's obviously going to be key in hitting your overall guidance for the year. We're 1 month into the Q3, you're accessing from Leadbetter and now you've ramped up at Underground. So just the question is, what have you seen so far into the 3rd quarter?

Speaker 9

Is what you're mining and what you're milling and what you're recovering, is that all according to your plan so far into the 3rd quarter?

Speaker 4

So are we saying as far as go ahead, Gerard, sorry.

Speaker 2

Yes. Farooq, we'll give updates on the quarter at the end of each quarter. It's basically in line with plan, but I don't want to get into the habit of giving intra quarter updates 1 month in. So in a broad sense, we're comfortable with it, but I don't want to be confirming specifics.

Operator

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

Speaker 2

Well, thank you, everyone. That concludes the call. A replay will be available on our website later today. On behalf of the management team and everyone at Doshi and Agold, we appreciate you joining and wish you a very pleasant rest of day. Thank you.

Operator

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.

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Earnings Conference Call
OceanaGold Q2 2024
00:00 / 00:00