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OceanaGold Reports Third Quarter 2023 Operating and Financial Results

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OceanaGold Reports Third Quarter 2023 Operating and Financial Results

 

 

 

 

 

OceanaGold Corporation (TSX: OGC) (OTCQX: OCANF) reported its operational and financial  results for the three months ended September 30, 2023. The consolidated financial statements and the Management Discussion and Analysis are available at www.oceanagold.com.

 

Gerard Bond, President and CEO of OceanaGold, said “The third quarter was always expected to be our lowest production quarter of 2023, though it was further impacted by isolated challenges in the final stage of the Mill Zone pit at Haile. However, strong performance at Didipio and Macraes keeps us on track to meet the low-end of our full-year consolidated production guidance range. We also achieved a number of exciting milestones across our business during the quarter: Haile produced its millionth ounce, first ore from the Haile Underground was mined, the ball mill at Macraes was comprehensively repaired and returned to full service, and some exciting exploration results were released at Didipio and Haile. We remain focused on safely and responsibly delivering on our consolidated full-year production guidance in the final quarter of the year and have laid the groundwork for a strong 2024 and beyond.”

 

Third Quarter Highlights

  • 12MMA total recordable injury frequency rate of 4.1 per million hours worked.
  • Consolidated production of 99,028 ounces of gold and 3,413 tonnes of copper.
  • Third quarter All-In Sustaining Costs of $1,911 per ounce on gold sales of 97,911 ounces.
  • YTD AISC of $1,563 per ounce on gold sales of 349,064 ounces.
  • Revenue of $214 million, EBITDA of $59 million and NPAT of $(6) million.
  • YTD revenue of $759 million, EBITDA of $312 million and NPAT of $102 million.
  • Adjusted earnings of $0.00 per share and operating cash flow of $0.08 per share.
  • Repaid $15 million on the revolving credit facility during the quarter.
  • Net debt of $172 million as at September 30, 2023, at a leverage ratio of 0.41 times.
  • First development ore from the Haile Underground delivered to surface and on track for first stope ore to the mill in October.
  • Extended known mineralization approximately 100 metres below the existing resource at Didipio.
  • Haile third quarter production adversely impacted by final stage of now complete Mill Zone Pit.
  • Macraes ball mill fully repaired and milling returned to full capacity in August 2023.
  • Semi-annual dividend of $0.01 per share paid October 6, 2023.

 

Table 1 – Production and Cost Results Summary

 

Quarter ended
30 September 2023
Haile Didipio Waihi Macraes Consolidated
 Q3 2023 Q2 2023 Q3 2022
Production, Sales & Costs
Gold Produced koz 23.0 30.5 10.9 34.7 99.0 130.1 105.0
Gold Sales koz 23.2 29.7 11.0 34.0 97.9 139.1 111.4
Average Gold Price US$/oz 1,930 1,944 1,924 1,930 1,934 1,967 1,699
Copper Produced kt 3.4 3.4 3.4 3.6
Copper Sales kt 3.1 3.1 3.5 3.7
Average Copper Price (2) US$/lb 3.76 3.76 3.67 3.14
Cash Costs US$/oz 1,063 754 1,549 1,004 1,003 725 1,100
Site AISC  (1) US$/oz 3,047 872 2,196 1,550 1,911 1,318 1,554
Operating Physicals
Material Mined kt 7,683 443 268 11,347 19,741 20,922 20,082
Waste Mined kt 7,359 29 141 9,295 16,824 16,668 16,947
Ore Mined kt 324 414 127 2,052 2,917 4,254 3,135
Mill Feed kt 777 1,014 131 1,338 3,260 3,651 3,454
Mill Feed Grade g/t 1.21 1.04 2.77 0.97 1.12 1.30 1.13
Gold Recovery % 76.6 89.8 93.0 83.6 84.2 85.2 82.6
Capital Expenditures
General Operations US$m 12.7 2.9 1.1 6.8 23.5 26.5 18.9
Pre-strip & Capitalized Mining US$m 32.7 0.6 5.0 8.9 47.2 40.9 19.7
Growth US$m 14.9 2.4 1.7 0.5 19.5 16.6 12.4
Exploration US$m 1.7 0.7 4.2 0.4 7.0 6.5 5.4
Total Capital Expenditures US$m 62.0 6.6 12.0 16.6 97.2 90.5 56.4

 

Year to date
30 September 2023
Haile Didipio Waihi Macraes Consolidated
YTD 2023 YTD 2022
Production, Sales & Costs
Gold Produced koz 1414.6 95.7 35.9 100.9 347.2 351.3
Gold Sales koz 116.6 95.9 35.8 100.8 349.1 350.4
Average Gold Price US$/oz 1,942 1,948 1,940 1,937 1,942 1,828
Copper Produced kt 10.3 10.3 10.9
Copper Sales kt 9.9 9.9 11.2
Average Copper Price (2) US$/lb 3.90 3.90 3.79
Cash Costs US$/oz 720 642 1,284 1,034 847 865
Site AISC  (1) US$/oz 1,755 727 1,949 1,611 1,563 1,338
Operating Physicals
Material Mined kt 25,909 1,287 716 35,567 63,479 64,942
Waste Mined kt 23,300 101 378 29,328 53,107 54,667
Ore Mined kt 2,609 1,186 339 6,239 10,372 10,277
Mill Feed kt 2,484 3,086 341 4,096 10,007 10,240
Mill Feed Grade g/t 1.76 1.08 3.50 0.93 1.27 1.27
Gold Recovery % 81.0 89.5 93.5 82.3 84.6 83.1
Capital Expenditures
General Operations US$m 37.1 5.2 2.3 26.2 70.8 49.1
Pre-strip & Capitalized Mining US$m 78.3 2.6 18.7 30.4 130.0 79.9
Growth US$m 38.9 5.1 5.8 1.3 51.1 41.3
Exploration US$m 4.5 1.4 9.6 2.3 17.8 16.6
Total Capital Expenditures US$m 158.8 14.3 36.4 60.2 269.7 186.9
(1) Site AISC are exclusive of corporate general and administrative expenses but include share based remuneration paid to eligible site employees, Consolidated AISC is inclusive of corporate general and administrative expenses which includes share based remuneration paid to eligible non-operations corporate employees. Cash Costs and All-In Sustaining Costs are reported on ounces sold and net of by-product credit basis.
(2) The Average Copper Price Received calculated includes marked to market revaluations on unfinalized shipments as well as final adjustments on prior period shipments per accounting requirements.
Notes:
Consolidated capital excludes rehabilitation and closure costs at Reefton and Junction Reefs plus corporate capital projects not related to a specific operating region; these totalled $0.9 million and $0.3 million respectively in the third quarter. Capital and exploration expenditure by location excludes related regional greenfield exploration where applicable.

 

 

Table 2 – Financial Summary

 

Quarter ended 30 September 2023

(US$m)

Q3

30 Sep 2023

Q2

30 Jun 2023

Q3

30 Sep 2022

YTD

2023

YTD

2022

Revenue 214.1 301.0 213.9 759.0 729.0
Cost of sales, excluding depreciation and amortization (113.3) (121.1) (143.1) (352.9) (377.4)
General and administration – indirect taxes (1) (7.4) (5.1) (3.4) (18.1) (11.7)
General and administration – other (16.9) (18.8) (12.3) (53.9) (37.9)
Additional Government Share (2) (13.9) (13.9)
Foreign currency exchange gain/(loss) (3.4) (3.2) (15.7) (8.7) (30.5)
Other income/(expense) (0.3) 0.7 0.2 1.3
EBITDA (excluding impairment expense) (3) 59.2 152.5 40.1 311.7 272.8
Depreciation and amortization (51.7) (60.2) (46.3) (157.0) (148.7)
Net interest expense and finance costs (4.4) (4.8) (1.6) (14.7) (5.1)
Earnings before income tax (excluding impairment expense) (3) 3.1 87.5 (7.8) 140.0 119.0
Income tax (expense)/benefit on earnings (8.6) (18.9) 1.4 (38.0) (23.0)
Earnings after income tax (excluding impairment expense) (3) (5.5) 68.6 (6.4) 102.0 96.0
Impairment of exploration/property expenditure/investment (4) (4.4)
Net Profit/(loss) after Tax (5.5) 68.6 (6.4) 102.0 91.6
Basic earnings/(loss) per share $(0.01) $0.10 $(0.01) $0.14 $0.13
Earnings/(loss) per share – fully diluted $(0.01) $0.09 $(0.01) $0.14 $0.13
(1) Represents production-based taxes in the Philippines, specifically excise tax, local business and property taxes.
(2) As at September 30, 2023, there was an initial recognition of the Additional Government Share. Under the addendum and renewal agreement of the FTAA under which the Company’s Didipio mine in the Philippines operates, the Philippines government is entitled to the Additional Government Share. This is equal to 60% of the Net Revenue of the mine less taxes and fees paid to the government after the Company’s recovery of the pre-operating expenditure. The Additional Government Share has been recognized on a life to date basis and has been recorded within Trade and other payables.
(3) EBITDA, EBIT and Earnings after income tax are non-GAAP measures. Refer to the Accounting & Controls section of this report for an explanation.
(4) There were two write-offs in 2022 totalling $4.4 million related to capital projects in New Zealand and the Sam’s Creek investment.

 

 

Table 3 – Cash flow Summary

 

Quarter ended 30 September 2023

(US$m)

Q3

30 Sep 2023

Q2

30 Jun 2023

Q3

30 Sep 2022

YTD

2023

YTD

2022

Cash flows from Operating Activities 62.5 161.7 45.0 289.4 268.5
Cash flows used in Investing Activities (92.1) (89.4) (55.1) (263.1) (190.6)
Cash flows used in Financing Activities (22.7) (14.6) (6.9) (43.9) (72.9)
Free Cash Flow (29.6) 72.3 (17.1) 26.3 55.0
Note: Free Cash Flow in 2023 has been calculated as Cash flows from Operating Activities, less Cash flows used in Investing Activities. In the prior year, Free Cash Flow was calculated as Cash flows from Operating Activities, less Cash flows used in Investing Activities less finance lease principal payments which are reported as part of cash flow used in financing activities in 2022.

 

 

Operations

 

The Company produced 99,028 ounces of gold and 3,413 tonnes of copper in the third quarter of 2023. Third quarter gold production was 24% lower than the previous quarter and 6% lower than the corresponding quarter in 2022. The quarter-on-quarter reduction was driven by decreased production at Haile, with lesser contribution quarter-on-quarter also from Macraes and Waihi. The Company has produced 347,207 ounces of gold and 10,324 tonnes of copper year-to-date (“YTD”), which was broadly in line with the corresponding period in 2022.

 

On a consolidated basis, the Company recorded a third quarter AISC of $1,911 per ounce on gold sales of 97,911 ounces and copper sales of 3,133 tonnes. This was a 45% increase in AISC compared to the previous quarter and a 23% increase compared to the corresponding period in 2022. The quarter-on-quarter increase was mainly driven by 30% lower comparative gold sales, especially from Haile. YTD the Company has recorded an AISC of $1,563 on sales of 349,064 ounces of gold and 9,877 tonnes of copper. AISC excludes the Additional Government Share of $13.9 million at Didipio for both the third quarter of 2023 and YTD 2023 related to the Financial or Technical Assistance Agreement (“FTAA”).

 

Haile produced 22,961 ounces of gold in the third quarter. The 47% reduction compared to the previous quarter was due to lower than expected grades from the lower benches of the Mill Zone pit and a planned transition to waste stripping at Ledbetter pit; mining in Mill Zone was completed in the third quarter. Haile’s third quarter AISC was $3,047 per ounce, a material increase compared to the previous quarter largely driven by the lower quarter-on-quarter gold sales. YTD Haile has produced 114,640 ounces of gold at an AISC of $1,755 per ounce sold.

 

During the third quarter, first development ore was mined and stockpiled from the Horseshoe Underground mine at Haile. First stope ore was achieved in mid-October and three production stopes are planned to be mined and delivered to the mill in the fourth quarter of 2023.

 

Didipio produced 30,479 ounces of gold and 3,413 tonnes of copper in the third quarter. The 5% reduction in gold production compared to the previous quarter was mainly due to slightly lower grades consistent with the mine plan. Copper production was largely flat quarter-on-quarter. Didipio’s third quarter AISC was $872 per ounce on gold sales of 29,657 ounces and 3,133 tonnes of copper, an 18% increase on the previous quarter due to lower by-product credits (mainly volume related) and higher production taxes. YTD Didipio has produced 95,720 ounces of gold and 10,324 tonnes of copper at an AISC of $727 per ounce.

 

Macraes produced 34,725 ounces of gold in the third quarter. The 12% reduction compared to the previous quarter was due to lower total mill feed with ball Mill No:2 (“ML-02”) taken down for repair in July. The repair was completed in August and ML-02 was returned to service and operated at full capacity for the remainder of the third quarter. Macraes third quarter AISC was $1,550 per ounce, a 20% increase compared to the previous quarter mainly due to the lower quarter-on-quarter gold sales. YTD Macraes has produced 100,901 ounces of gold at an AISC of $1,611 per ounce.

 

Waihi produced 10,863 ounces of gold for the third quarter. The 27% decrease compared to the previous quarter was driven by a 36% decrease in feed grade, as mining encountered additional lower grade remnant ore material, partially offset by a 10% increase in ore tonnes mined. Waihi’s third quarter AISC was $2,196 per ounce, a 36% increase compared to the previous quarter mainly driven by the lower quarter-on-quarter gold sales. YTD Waihi has produced 35,945 ounces of gold at an AISC of $1,949 per ounce.

 

Financial

 

The Company recorded third quarter consolidated revenue of $214.1 million, a 29% decrease compared to the previous quarter largely driven by 30% lower gold sales. The decrease in gold sales reflected the aforementioned performance at Haile, Macraes and Waihi. Third quarter revenue was broadly in line with the corresponding period in 2022.

 

The Company has YTD consolidated revenue of $759.0 million, a 4% increase relative to the corresponding period in 2022, driven by a 14% higher realized gold price for the Company and an 18% increase in gold sales at Macraes. This was partially offset by a 42% decrease in gold sales at Haile and a 18% decrease in gold sales at Waihi relative to the corresponding period.

 

Third quarter EBITDA was $59.2 million, a 61% decrease relative to the previous quarter mainly due to the lower revenue and the Additional Government Share of $13.9 million recognized for the first time at Didipio, partially offset by lower costs of sales. YTD consolidated EBITDA was $311.7 million, reflecting a 14% increase compared to the corresponding period in 2022 with higher revenue and lower foreign currency exchange losses, partially offset by higher general and administration costs including indirect taxes and the Additional Government Share at Didipio.

 

Third quarter Net Loss After Tax was $(5.5) million or $(0.01) per share fully diluted, compared with a Net Profit After Tax of $68.6 million and $0.09 per share fully diluted in the previous quarter.

 

Third quarter Adjusted Net Loss After Tax was $(1.6) million or $0.00 per share fully diluted compared with an Adjusted Net Profit After Tax of $70.4 million or $0.10 per share in the previous quarter.

 

YTD Net Profit After Tax was $102.0 million, a 6% increase compared to the corresponding period in 2022.

 

Third quarter cash flows from operating activities were $62.5 million, which was 61% below the previous quarter reflecting both the lower revenue and EBITDA in the third quarter, in line with plan. YTD cash flows from operating activities totalled $289.4 million, which was 8% above the corresponding period in 2022.

 

Third quarter cash flows used in investing activities totalled $92.1 million, which was 3% above the prior quarter, due primarily to higher quarter-on-quarter pre-stripping and capitalized mining costs and growth capital expenditure primarily related to the Haile underground mine development.

 

The Company’s Free Cash Flow for the third quarter was $(29.6) million. YTD FCF is $26.3 million.

 

As at September 30, 2023, the Company’s available revolving credit facilities remained at $250 million, with $115 million undrawn following a discretionary repayment of $15.0 million during the third quarter. The Company had immediately available liquidity of $175 million including $60.3 million in cash.

 

The Company’s Net Debt position, inclusive of equipment leases, increased to $171.6 million from $136.3 million in the previous quarter primarily due to the decrease in cash and cash equivalents as a result of negative FCF and payment of the semi-annual dividend. The Company’s leverage ratio was 0.41 times as at September 30, 2023.

 

Outlook

 

Overall, the Company expects to deliver gold production within its original production range, albeit towards the lower end of the range. Copper production and group capital and exploration expenditure guidance remains unchanged, with changes at the asset level offsetting each other. AISC guidance has been lifted by $125 per ounce reflecting the impact of lower production from Haile.

 

The Company’s updated 2023 full year guidance is presented in the tables below.

 

Production & Costs Haile Didipio Waihi Macraes Consolidated
Gold Production koz 140 150 125 135 50 60 130 140 460 480
Copper Production kt 12 14 12 14
Cash costs $/oz 950 1,050 500 600 1,350 1,450 900 1,000 850 950
All-in sustaining costs (1)  $/oz 1,950 2,050 650 750 1,800 1,900 1,575 1,675 1,550 1,650

 

Capital Investments
(US$m)
Haile Didipio Waihi Macraes Consolidated
(2)
Included
in AISC
Pre-strip and Capitalized Mining 85 95 4 6 20 25 45 50 155 170 155 170
General Operations 45 50 10 15 3 5 30 35 85 100 85 100
Growth 40 45 5 10 10 15 1 3 60 70
Exploration 6 8 3 5 13 18 2 4 25 35 7 9
Total Investments 180 200 25 35 45 55 80 90 330 385 245 285
1. Consolidated AISC include corporate costs. AISC guidance based on copper price of $3.75/lb.
2. Includes corporate capital and excludes Reefton and junction Reefs Rehabilitation costs and equipment leases classified as non-sustaining at inception.

 

 

As stated in the news release dated September 14, 2023, under reconciliation in the lower benches of the now complete Mill Zone pit negatively impacted Haile’s production guidance for the year. However, due to strong operating performance YTD and projected for the remainder of the year at both Didipio and Macraes, the Company still expects to produce above the bottom end of the original group gold production guidance range of 460,000 ounces, but has narrowed the top end of the gold production guidance to be 480,000 ounces. The Company’s copper production guidance of between 12,000 to 14,000 tonnes remains unchanged.

 

Reflecting the lower production guidance, group cash cost guidance has increased to $850 to $950 per ounce and AISC guidance has increased to $1,550 to $1,650 per ounce for the year.

 

As previously announced, full year production at Haile is expected to be approximately 25,000 ounces below the bottom of the original guidance range, with full year production now expected to be 140,000 to 150,000 ounces of gold. Consequently Haile’s AISC will be higher and is now expected to be between $1,950 and $2,050 per ounce.

 

Didipio full year production is expected to exceed the original guidance range, which has been increased to 125,000 to 135,000 ounces of gold, with copper guidance unchanged at 12,000 to 14,000 tonnes of copper. As a result of the higher production, AISC is expected to be lower than original guidance and is now expected to be between $650 and $750 per ounce.

 

Through increased throughput initiatives at Macraes following the ball mill repair, Macraes is expected to exceed its original production guidance and is now expected to produce between 130,000 and 140,000 ounces of gold for the year. As a result of the higher production, AISC is expected to be lower than original guidance and is now expected to be between $1,575 and $1,675 for the year.

 

Waihi’s 2023 production guidance of between 50,000 and 60,000 ounces of gold remains unchanged. However, a projected increase in operating costs including contract workers and additional water management costs means that AISC is now expected to be between $1,800 and $1,900 per ounce, which is higher than original guidance.

 

The Company also maintains its consolidated capital and exploration expenditure guidance of between $330 million and $385 million unchanged. However, based on the latest mine plans and the timing of planned capital expenditure programs, the full year general operations capital and growth capital guidance ranges have been reduced to $85 million to $100 million and $60 million to $70 million, respectively, while pre-strip and capitalized mining costs have been increased to $155 million to $170 million. Exploration expenditure guidance remains unchanged.

 

About OceanaGold 

 

OceanaGold is a growing intermediate gold and copper producer committed to safely and responsibly maximizing the generation of Free Cash Flow from our operations and delivering strong returns for our shareholders. We have a portfolio of four operating mines: the Haile Gold Mine in the United States of America; Didipio Mine in the Philippines; and the Macraes and Waihi operations in New Zealand.

 

Posted October 26, 2023

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