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spk02: Good morning and afternoon, ladies and gentlemen, and welcome to the Oceana Gold 2023 Third Quarter Results Webcast and Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Thursday, October 26, 2023 at 9 a.m. Eastern Time. And I would like to turn the call over to Rebecca Harris. Please go ahead.
spk00: Good morning and welcome to Oceana Gold's third quarter 2023 results webcast and conference call. I'm Rebecca Harris, Director of Investor Relations. We are joined today by Jared Bond, President and Chief Executive Officer. Marius van Niekerk, Chief Financial Officer. David Londano, Chief Operating Officer, Americas. Peter Sharp, Chief Operating Officer, Asia-Pacific. and Craig Febrey, Chief Exploration Officer. Also present is Brian Martin, Senior Vice President, Business Development and Investor Relations. presentation that we will be referencing during the conference call is available through the webcast and on our website. I would also like to remind everyone that our presentation will be followed by a Q&A session. 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&A, as well as the risk factors set out in our annual information form. All dollar amounts discussed on this conference call are in U.S. dollars. I will now turn the call over to Jared for opening remarks.
spk09: Thank you, Rebecca, and good morning, everyone. Thank you for joining us today. I'll begin our overview of our Q3 results with safety. A 12-month moving average total recordable injury frequency rate at the end of September was 4.1 per million hours worked. This is a little above what we've reported previously, which would broadly be a concern. However, this is coming off industry-leading low injury rates, and the nature of the injuries we had had fortunately been low severity. We are committed to creating a safe workplace at Oceania Gold, and in support of this, we are rolling out the Our Safe Behaviours program across our business, which is a proven program that focuses on our workforce being empowered to work safely and to mindfully identify risks before performing a task. From a production standpoint, Oceania Gold produced just over 99,000 ounces of gold and 3,400 tonnes of copper in the third quarter. At the start of the year, we did expect Q3 to be our weakest quarter. However, as detailed in our September 14th news release, it turned out to be weaker than expected due to the poor grade reconciliation in the final benches of the Hale mill zone pit. Mining in mill zone is now complete. So that reconciliation issue is behind us and we have transitioned into a stripping phase at the Leadbetter pit. The third quarter was additionally impacted by disappointing production from Waihi, driven by an increased reliance on redundant stope material in the period. We expect to source more ore from fresh stope in areas in the fourth quarter and finish the year with stronger production at Waihi. Despite its lower production, Hale celebrated a number of positive milestones in the quarter, including mining its one millionth ounce of gold since start-up in 2017. Hale also delivered first development ore from the Horseshoe Underground in the third quarter. Subsequent to quarter end, Hale blasted its first stope and has now begun processing through the mill both stope and development ore. To think we only blasted the portal at the beginning of the mine 13 months ago. We're extremely proud of the team for achieving these milestones with the Underground safely and on schedule. At Macraes, the bore mill was repaired and returned to full operation in August with no further disruptions from this issue expected going forward. The rate of milling at Macraes is now higher than ever before as a result of some of the learnings derived through this repair period. And this higher milling rate is why we expect Macraes to perform strongly for the remainder of the year. During the quarter, we released some excellent exploration drill results at the DPO at Hale, with the results from both representing an exciting upside to our current plans at those operations. Craig will share more about this later on the call. Moving on to guidance. Although Hale's full year production guidance is now lower than originally expected, the strong performance and outlook at both McRae's and the DPO allows us to remain within our original group production guidance range. With three quarters behind us, we're tracking towards the bottom end of the original production guidance range for the year and have narrowed the top end of guidance to reflect these changes at a group level. Consolidated gold production guidance now sits at 460,000 to 480,000 ounces of gold, with 347,000 ounces produced year-to-date. Copper guidance remains unchanged, and we're expecting to be towards the top end of the 12,000 to 14,000 ton range, with more than 10,000 tons of copper produced so far this year. As mentioned, due to the lower production from hail, our all-in sustaining cost guidance for the year will consequently increase. We've updated group cost guidance to be $1,550 to $1,650 per ounce. Overall, total group capex and exploration expenditure is on track to be within our full year guidance of $330 to $385 million. We know that delivering on production guidance is a key expectation in the market, and our focus remains on delivering within our original production guidance range while continuing to focus on operational efficiencies to safely and responsibly lower our cost in producing those ounces. Now to turn the call over to Marius, who will provide an overview of our third quarter results.
spk04: Thank you, Gerard, and good morning, everyone. As Gerard has mentioned, our Q3 production performance was our weakest quarter of the year. Consequently, we generated negative $30 million of free cash flow during the quarter, which included higher pre-stripping and underground development costs at Hale. However, a strong first-off and an improvement expected in Q4 still positions us well to continue to repay debt when appropriate and invest in organic growth opportunities across the business. During the quarter, we repaid $15 million on a revolving credit facility. And in October, we paid our semi-annual dividend of one cent per share, totaling $7.1 million. Here tonight, we have generated $759 million of revenue, EBITDA of $312 million, and net profit after tax of $102 million. Our Q3 net loss after tax of $6 million was significantly lower than the previous quarter. When adjusted for the non-cash, unrealized foreign exchange loss and other items, this equated to an EPS of 0 cents per share fully diluted, while operating cash flow equated to 8 cents per share fully diluted. Our financial position remains strong with $172 million in net debt and liquidity of $175 million at the end of the quarter. At a leverage ratio of 0.41 times, we have the financial flexibility to continue investing in the exciting growth projects across our business. This quarter, we accrued $13.9 million for the additional government share, per the terms of the FTAA with the Philippines government. This is the first accrual, and the final amount due for 2023 will be finalized at year eight, payable in Q2 of 2024. It was driven by strong operational performance and higher gold prices, resulting in higher ounces and profitability. In broad terms, the Philippines government is entitled to a 60% share of net revenue once the company has effectively recovered its capital investment in the W. In Q3, we effectively crossed this threshold and expect to buy the additional government share moving forward. Net revenue is essentially a modified EBITDA calculation with all other taxes paid, including production, income and withholding taxes forming part of the government share. It is in the nature of an income tax and for that reason excluded from AISC. With the first payment due in 2024, and given that additional government share payments are expected to continue annually thereafter, we will provide annual guidance based on the defined metal pricing assumptions going forward. I will now turn the call over to David to discuss the whole operation.
spk03: Thank you, Marius, and hello, everyone. Third quarter gold production at Hale was 23,000 ounces. The quarter-on-quarter reduction was driven by lower-than-expected grades in the bottom benches at the mill zone pit. Mining from mill zone was completed on schedule during the third quarter and has now transitioned to pre-stripping the next pushback to Leadberry pit, which is Leadberry Phase II. This will continue through the fourth quarter, and our production from Leadbeater 2 will ramp up through the first half of 2024. At discussing the recent September news release, Hayes full-year production is now expected to be below the original guidance range set out at the beginning of the year. We have revised the range to 140,000 to 150,000 ounces to reflect the year-to-date performance And as a result of the lower production, we have also increased the 2023 cash cost and all in sustaining cost ranges. During the quarter, we continue drilling horseshoe underground with two rigs, focusing on both gray control and resource conversion drilling front, which we released some great results in September. Craig will discuss more on those shortly. Now moving into hail expansion. Q3 marked a significant milestone at Hale as we mined first-development ore from Horseshoe Underground. Ore was mined on two levels and stockpiled on the surface during the quarter. In mid-October, we blasted our first stop from the 1025 level and have begun processing the stop and the stockpiled development ore through the mill. Continue to advance development as we ramp up to full production rates by the middle of 2024. Great control in advance of production has returned results in line with expectations, giving us increased confidence for the three stops that we plan to mine in Q4. The detailed planning and execution has resulted in delivering ore from the horseshoe underground in the fourth quarter, in line with our guidance to the market set for at the start of the year. We are delighted to announce that we were able to mine our first stop in October, and I commend the team for the great work in making this to happen safely. This project will drive production growth and lower oil in sustaining costs at tail over the coming years, and will make an outsized impact to the future outlook and free cash flow generation for Oceania Gold. I will now turn the call over to Peter to discuss the DPO and our New Zealand assets.
spk05: Thank you, David, and good morning, everyone. At DDPO, third quarter gold production of 30,000 ounces and copper production of 3,400 tonnes were in line with our full year plan. When added to the results of a strong first half, we are tracking ahead of the original 2023 guidance. With that, we've increased gold production guidance at DDPO to between 125,000 and 135,000 ounces of gold. and maintain copper production guidance, although we do expect to be at the top of the 12,000 to 14,000 tonne range. Similar to year-to-date production, a strong first half cost performance has driven a $100 per ounce all-in sustaining guidance reduction for the DPO. We are making good progress in our study to increase underground mining rates to at least 2 million tonne per annum, and positive results suggest that we will advance the study to a PFS level from a scoping study. We hope to be able to provide a summary to the market in the new year and include the findings of the work in a fulsome updated NI43-101 in the first half of 2025. We continued investing on community projects during the quarter in line with our commitments and exploration drilling is also progressing on all body extensions with targets to the northwest and at depth. I will let Craig speak more about results released during the quarter shortly. Now onto McRae's. McRae's produced 35,000 ounces of gold in the third quarter, 12% lower than the previous quarter due to the additional work undertaken on ball mill two. I'm happy to say that in late August, we completed the full repair of the mill and it was returned to full production levels. Despite the challenges with ball mill two at McRae's this year, The team has done a fantastic job with other throughput initiatives that more than offset the losses from the ball mill downtime this year. With that, we are increasing McRae's production guidance to 130,000 to 140,000 ounces of gold for the year and expect to be able to continue operating at these higher mill throughput levels going forward. All-in sustaining costs during the quarter was $1,550 per ounce, which is the second quarter in a row that we've been below guidance range. The higher than expected production has helped drive lower unit costs, and as such, we are allowing our all-in sustaining guidance by $50 an ounce for the year at Macraes. Our Fraser's underground operation was scheduled to be complete by the end of the first half of 2023, with focus shifting to Golden Point Underground We have pleasingly encountered additional remnant ore at Fraser's Underground, which will allow us to continue mining there into the first quarter of 2024. At the same time, we continue to study the options around the Round Hill open pit and expect to be able to update the market as part of our annual R&R update next year. Now to the North Island of New Zealand, where our Waihi operation produced approximately 11,000 ounces of gold this quarter. The decrease in production compared to the previous quarter was primarily due to challenging ground conditions encountered in the areas of the mine where fresh ore stopes are located, resulting in us mining more ore from lower-grade remnant stopes and fill areas instead. We expect to move into higher-grade fresh stopes in the fourth quarter and still expect to be within original full-year guidance range. All-in sustaining cost for the quarter was higher than the previous quarter, driven by lower gold sales and higher operating costs. costs, namely contract worker costs. We continue to work towards lowering these costs, but given the year-to-date cost performance and outlook, we are increasing all in sustaining cost guidance for 2023 at Waihi. I will now hand it over to Craig to provide an exploration overview.
spk01: Thank you, Peter. During the quarter, we continued our brownfield exploration programs across the business, focusing on creating value via resource conversion and growth. Starting at Hale, during the quarter, we released an exploration update which delivered results from both Horseshoe and Palomino in line with, and in some cases, better than our expectations. One of our best holes drilled to date targeted the conversion of the lower horseshoe inferred resource and intercepted 74 meters at 13 grams per ton gold and returned better than expected grade. This high grade zone at the bottom of the resource remains open at depth and is an exciting target that we're planning to drill in 2024. Our resource conversion program at Palomino has also been successful with drilling now largely complete. We look forward to updating the market on the progress in 2024. During the quarter, we also released exploration results at Didipio, where we continued to convert resources and test depth extensions. Hole 611, for example, returned 72 metres at 3.4 grams per tonne gold equivalent, which provides further opportunity to extend the resource at Didipio least another 100 meters below the current existing inferred resource. Infill drilling continues higher up in the mine with results in line with expectations today. Further drilling is planned for the remainder of this year and in 2024 to support a technical report in the first half of 2025. Finally, at Waihi, drilling continues to extend the high-grade southern chute on the EG vein at Farakiraponga, where we're in the process of preparing a new drill platform to continue testing at strike extent. We have the third rig now drilling on site and expect to provide further updates to the market as results come in. I'll now turn the presentation back to Jared. Thank you. Thank you, Craig.
spk09: In summary, our third quarter results represent our weakest quarter of the year. We expect to improve in Q4 and deliver production within the bottom end of the original production guidance range. We are focused on safely and responsibly maximising the free cash flow generation of the company. And although Q3 was not a good quarter in this regard, it was a quarter of considerable investment. And our outlook for organic growth and free cash flow generation in 2024 and beyond remains strong. Shareholders can be certain we remain focused on running the business well and investing wisely to create shareholder value and higher returns to shareholders. I'll now turn the call over to the operator and open up the line to take any questions.
spk02: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touch-tone phone. You will then hear a three-tone prompt acknowledging your request. And if you would like to withdraw from the question queue... please press star followed by two. And if you're using a speakerphone, we do ask that you please lift the handset before pressing any keys. Please go ahead and press star one now. If you do have any questions. And your first question will be from Oves Habib at Scotiabank. Please go ahead.
spk08: Hi, good morning, Gerard and Olga. A second question from me, please. You know, starting off with the hail underground, obviously you guys are doing a lot of inflow drilling, grade control drilling, and into the stoves. You have three stoves prepared for Q4. Can you give us any sort of, you know, kind of, you know, information on how the grade control drilling has been progressing? I mean, you talked about it's in line. Is it giving you confidence that, you know, that the tons and the ore that you were looking for is going to be, produced in Q4 and kind of any sort of insight on what 2024 might look like?
spk09: Yeah, thanks. Thanks for the question. I'll hand it over to David for detail. But yeah, I think we have to your point. We have said previously that we expect that we have grey control drilled all the areas that we intend to mine this year. And that gives us a high degree of confidence that what we expect to occur from underground will occur. And so far, it has performed accordingly. Now, that's interesting. That's a couple of weeks of production. But David, do you want to supplement that answer with anything?
spk03: Yeah, no. So the control that we did, the holes that we drilled so far, they're coming a little bit actually higher than the resource model is showing. So we expect that we are going to be at the resource model level or better than we expect. We're also using a little drill and we're drilling the bottom, the middle, and the top of the tunnels. And again, that information is coming positive. So we're very confident that we can achieve the tons and the grade that we're expecting.
spk08: That's great, David, and thanks for that. And just, David, in terms of underground development rates, is that kind of on target? Do you need to, you know, be better in terms of opening up the mine on underground development? And also, maybe if you can talk about, you know, how is kind of CapEx shaping up for going into the end of the year? Is that starting to taper off or should we see some of the CapEx kind of going into 2024 as well?
spk03: So development, actually, we're doing much better than we are forecasting. So we were doing through Q3 about 330 meters per month. October is shaping up to be a little bit above 400 meters. So we're very happy with the performance in the development. some of the capex so since we start the production now of the underground so we can have some operating costs and obviously the development is going to be capitalized but the capex for the original project is pretty much finished excellent thanks david for that and and just the last question maybe switching gears to uh philippines at the dipio
spk08: Obviously, there's an optimized study that's planned to come out in the next couple of months. In terms of how you're looking at that study, maybe this is a question for Gerard. Is this study going to give you enough information to go forward with the project, assuming it's a positive study? Or do you need to do additional studies to give the green light to the project?
spk09: Yeah, thanks, Ove. Look, I'm highly confident that the study will take us in some direction towards confirming and perhaps extending the articulated target of being at least 2 million tonnes per annum. I mean, at one level, it seems all very simple. It's like mechanical optimization. But there is a lot of mind planning associated with that. So, you know, the Scoping Study, we expect to move into a pre-feasibility study. And so there is a bit of work to it. Peter, do you want to put any color on that answer?
spk05: Sean, hi, how are you? Yeah, so we will be entering into a PFS, but I mean, I think what we're seeing already is that the outcomes of the scoping study are quite positive. So we'll be taking into a PFS because we need to, and we do need to look at the various options around how do we actually take this project forward. But the reality is we will be progressing in parallel any opportunity that's more business as usual around uplifting the underground rate, just because we've identified through this process opportunity that we can just get after now. So I don't expect it to be a long, drawn-out two- to three-year study. I expect that we'll move from PFS quickly into fees. And, again, the target is that NI43 101 update in March 2025, which by that stage I think we'll have a very firm plan on what we can do and the target to go after.
spk08: Thanks for the colour on that, Peter. And, Gerard, that's all from me. Thanks for taking my questions.
spk09: Thank you, Irvax.
spk02: Once again, ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. And your next question will be from Wayne Lamb at RBC. Please go ahead.
spk07: Yeah, thanks. Morning, everyone. Maybe just a follow-up in terms of the grade control drilling. Seems like you had some issues with... at both Hale and Wahi. And I recall last year there was a similar issue as well on the reconciliation at Wahi. And just wondering if you could provide a bit more detail on, I guess, what happened at Hale on the mill pit. And, you know, if there's any steps that can be done to kind of help improve this grade control program or anything operationally that can help mitigate those surprises or volatility in grade.
spk09: Sure. Thanks, Wayne. Look, I mean, it's worth noting that mill zone, you know, where we experienced this underperformance, mill zone, gee, for much of its time, performed within 1% of expectation as it relates to both grade and ton. So mill zone actually performed well, but in that period, Final quarter, quarter and a bit, it actually underperformed because, you know, we were at the final two benches. The grade control drilling was, you know, that's at the deepest point. The greatest grade control drilling was sparse. We had two drill holes into that at that depth. One was at, something like four or five grams a ton. The other one was at 13 grams a ton. The methodology had the team interpolate an estimate of what the grade would be. But, of course, that interpolation is a guesstimation, and the guesstimation didn't pan out. The actual ore shaped differently to the interpolation. And so we like to think of mill zone having performed well, but in the stub, you know, that final stub of the mill, of the pit, it did not. So we don't think there's any systematic issue as it relates to hail at all. And Leadbetter has performed well. And of course, we're at the upper benches of Leadbetter which has a greater degree of great control drilling, so we remain confident that Leadbetter, that we intend to mine in coming years, will not experience the same issues that the final two benches of Mill Zone did. At Waihi, that was a different issue. That was in the first quarter of last calendar year. And the issues that we experienced this quarter had more to do with the mix of where we were mining rather than grey control drilling per se. So it was not a grey control issue at Waihi, other than when you are mining more in remnant stope areas, the level of grey control drilling that you can do in remnant stope areas is by definition less than you can do in fresh stopes.
spk07: Okay, great. Thanks for providing that color. And then just maybe wondering if you can comment on some of the cost creep you're seeing at WAHI. And does any of that apply to McRae's in terms of increase in labor costs?
spk09: Look, I mean, there's labor inflation across the board and universally, globally. But, you know, we... The issues at WAHI as it relates to cost on a per unit basis are more due to the small number of units than anything else. Three quarters of the increased in unit cost guidance and performance even in the quarter was due to the lower units. Labor inflation specifically mentioned in relation to why he is more due to the fact that we struggled to fill some seats and we had to get contract labor in. And by definition, contract labor is a little more expensive. You know, the site has done a great job at kind of restoring that. But you can get caught short on headcount for certain roles at a point in time. As I said, we supplemented that with contract labour, but that number of contract labourers at why he's also reducing now as a result of recruitment efforts that have had effect since.
spk07: Okay, great. Thanks. And then maybe just last one for me. I just want to clarify on that additional government share. Did you guys say it will be paid out annually and next in Q2? And it includes the various local business taxes and excise taxes. And then just also curious why that's reported separately and not part of your consolidated income taxes bill.
spk09: Yeah, well, it's a form of just that last question. It's a form of income tax, but it's not an income tax. So I think for clarity, we'll break it out and show it separately. The nature of it is it's like an income tax, but it's technically not an income tax. um and and to your question your your yeah the answer resides in your question you know we we do pay it annually um and uh it is as described by maris as a you know in essence and an ebitda minus all other government taxes paid so it's like it's a net revenue calculation the net the calculation is actually in the 43 101 statement uh that we put out in march last year and um All taxes paid to government, whether that be income, excise, withholding and the like, are deductions in that calculation.
spk07: Okay, perfect. Thanks for taking my questions. Thank you, Wayne.
spk02: Thank you. As a reminder, ladies and gentlemen, if you do have any questions, you will need to please press star followed by one on your Dutch tone phone. And your next question will be from Mike Parkin at National Bank. Please go ahead.
spk06: Hi guys, just one final question for me. Can you just give us an update in terms of water management at Hale in terms of you've got the bigger water treatment plant there and how is that kind of going and overall where have you kind of come from versus where you are versus where you kind of expect to be in the next 12 months? From what I remember from the site tour earlier this year, it sounded like you were going to be moving into better and better positioning with water management, and that would also kind of help your cost structure going forward.
spk09: Yeah, great recollection, Mike, and thanks for the question. I'll let David answer it in detail, but yes, I think water management at Hale is now a success story. David?
spk03: Good morning, Michael. So the library pit, which is where we are mining currently, we're down to the last 80 million gallons on that pit, and we're moving about 100 million gallons a month. So we're going to be dry in that pit by the end of this month. Now, the snake pit, where we have about 250 to 300 million gallons, that's going to be in the next three months. So by February, we're pretty much going to be out of the contact water. So we will be... pretty much just working as it rains, just pumping any contact water that just comes out from drains. But we're pretty much out of the woods on that.
spk06: Great. That's a great update. Thanks very much, guys. Thank you, Mike.
spk02: Thank you. Again, as a reminder, ladies and gentlemen, if you do wish to ask a question, please press star 1 now on your touchtone phone.
spk00: And at this time, it appears that we have no other questions registered.
spk09: Thanks, operator. Well, that concludes our webcast and conference call today. A replay will be available on our website later today. On behalf of the management team and everyone at Oceana Gold, I appreciate you joining us and wish you a very pleasant rest of the day. Bye for now.
spk02: Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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