OceanaGold Corporation

Good morning, ladies and gentlemen, and welcome to the Oceana Gold Corporation Q3 2024 earnings conference call. At this time, all lines are now in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, November 7, 2024. I will now turn the conference over to Rebecca Henary. Please go ahead.

Good morning and welcome to Oceana Gold's third quarter 2024 results webcasting conference call. I'm Rebecca Henary, Director of Investor Relations. We are joined today by Jared Bond, President and Chief Executive Officer, Mary Fannikirk, Chief Financial Officer, David Landano, 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&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 in this conference call are in U.S. dollars. I will now turn the call over to Jared for opening remarks.

Thank you, Rebecca, and thanks to everyone for joining the call today. I'm pleased to say that Oceana Gold's third quarter results were excellent from a production, financial, and growth perspective. In total, we produced 37% more gold at a lower -in-sustaining cost quarter on quarter. All four operations delivered higher production at lower unit costs. This increase in gold production includes record quarterly production from HALE, which Together with record average realized gold prices, Oceana Gold generated an outstanding $66 million of free cash flow for the quarter. This free cash flow does not include 10,000 ounces of gold produced but not sold during the quarter. Our free cash flow margin of around $490 per ounce was derived on an average realized gold price of around $2,500 per ounce. The gold price has since moved higher. We're expecting the fourth quarter to be our strongest for the year from both a production and cost perspective. So we are also expecting another strong quarter of free cash flow generation. Our cash flow was deployed in line with our capital allocation framework, in which we were able to self-fund our exciting exploration and growth opportunities, repay debt, and buyback shares under our new buyback program. We also paid our semiannual dividend in October. In relation to exploration, during the quarter we shared some exciting draw results at HALE, where we had a number of incredibly high-grade intercepts. Our exploration program also confirmed increased mineralization at the high-grade WKP deposit. And during the quarter we were delighted to see that the Waihi North project, which includes the WKP deposit, is included on the New Zealand government's lists of projects being considered for fast-track consenting. We are progressing the Waihi North project pre-feasibility study and are on track to finalizing it by year end, and we look forward to sharing the outcomes of this. Finally, and most importantly, we've made good progress on our safety improvement plan, following the two fatalities at the Dipio, as previously reported. The safety of everyone working at Oceana Gold is the highest priority, and we are focused on improving the effectiveness of our two core safety programs, increasing hazard identification training, particularly in relation to stored energy. And we have increased the level of in-field safety coaching at the Dipio. Our people have worked hard to deliver the operational and financial results we are reporting today. We are all committed to this being done safely. I'll now turn the call over to Maris, who will discuss the financial highlights.

Thank you, Jared, and good morning, everyone. During the first quarter, we generated a record $345 million in revenue, with realized gold prices averaging around $2,500 per ounce. Our net profit was $61 million, and adjusted earnings per share was $0.09, which is in line with analyst consensus. This is more than double the $0.04 per share in the previous quarter. AISC improved to $1729 per ounce, a 19% decrease from the prior quarter, mainly driven by a 30% increase in gold sales volumes through increased production and an increase in by-product credits. As Jared mentioned, we achieved an important free cash flow inflection point for the business. We generated $66 million of free cash flow during the quarter, and close to $100 million year to date. This quarter's free cash flow was greater than the cumulative free cash flow generated in the first half of this year and the whole of last year combined. We expect a strong fourth quarter, which will further generate significant free cash flow. During the quarter, and in line with our capital allocation framework, we repaid $40 million of debt and brought back 3.2 million common shares at an average price of $3.37 per share. Our growing net cash position of $72 million allows us to advance our exciting exploration and growth opportunities and to improve shareholder returns. I will now turn the call over

to David to discuss the whole operation. Thank you, Marius, and hello everyone.

Pay produced record gold production in the third quarter with 64,900 ounces, which in turn dropped lower oiling sustaining costs for the quarter. Oil for the quarter was sourced from Leadbetter Open Pit, where we mined at an average grade of 243 grams per ton, and from Horseshoe Underground, where we increased underground tonnage at average grades of 624 grams per ton. As we were able to mine more ore than we were able to process during the quarter, it gave us the flexibility to direct feed the highest grades through the mill while continuing to build our ore stockpiles to be processed later. We expect the fourth quarter production to be stronger than the third quarter and achieve annual guidance with continued access to high-grade ore at Leadbetter and Horseshoe. As a result, we expect oiling sustaining costs to continue to reduce and bring us into our full-year guidance range. This quarter, we also released some exciting exploration results at Horseshoe and Horseshoe Extension. The results support our goal of increasing resources close to our existing infrastructure in the underground operation. We also released some outstanding infill results from Leadbetter Phase 4, which is currently in the mine plan as the last phase of the Leadbetter Open Pit. With these results, we are continuing to work on a trade-off study to evaluate the best path forward to mine Leadbetter 4, whether as an open pit or as an underground. I will now turn the call over to Peter to discuss the Asia-Pacific operations.

Thank you David and good morning everyone.

During the quarter, DiDiPio delivered gold production of approximately 28,000 ounces and copper production of 3,400 tonnes. Production was higher than the previous quarter, predominantly as a result of improved process plant availability. The site, however, experienced a significant storm event in early September, with roughly 170 millimetres of rain falling in a three-hour period, which was then followed by a number of other smaller rain events over the following week. Access to the mine was restricted for several days over this period, slightly impacting production performance. However, the unusual intensity of the storm did impact our exploration drill rigs located at the bottom of the mine, where the rain inflows exceeded our pumping capacity. We made good progress towards our goal to increase the mining rates from underground during the quarter, supported by the delivery of a new loader and a new truck. And we still expected to achieve annualised run rates of 2 million tonnes per annum by the end of this year, on our way to our target of 2.5 million tonnes by the end of 2026. Increased production in the Monza night areas are helping to offset the impacts of slower mining rates in the high-grade Breccia areas of the mine. Whilst we expect improved underground mining performance from DiDiPio in the fourth quarter, we are not expecting an increase in average mine grade due to the lower rates of mining from the high-grade Breccia areas, which we noted with our second quarter results. With this, we have adjusted our 2024 production guidance to 104,000 ounces and 108,000 ounces, and as a result of the lower ounces, our -in-sustaining guidance is now $1,000

to $1,100 per ounce. Macraes delivered another strong result during the quarter,

producing approximately 28,000 ounces of gold. Access to ore in the Innisfil 7 open pit was achieved midway through the quarter. Improving grades to the mill and ore delivery from this pit is expected to continue through the entirety of the fourth quarter. Macraes has performed in line with our expectations here today, and we expect it to be able to meet its original production guidance with increased production in the fourth quarter. In our efforts to assess opportunities for additional mineralisation in Macraes that could be economic at these higher gold prices, we spent an additional $800,000 on drilling this quarter and expect to spend another $1 million of additional

drilling in the fourth

quarter.

Why he produced around 14,000 ounces of

gold in the quarter, an improvement over each of the first two quarters this year. This was driven by slightly higher grades mined and improved compliance to plan in the remnant mining areas. We expect to be able to maintain these improvements going forward to drive a stronger fourth quarter. Whilst we are pleased with the improvements, we do not expect to fully recover the effects of the first half performance, and as such we have revised Whyhe's 2024 production guidance to 48,000 to 52,000 ounces, and as a result of the lower ounces, our all in sustaining cost guidance is now $2,225 to $2,375 per ounce. The longer term outlook for Whyhe will be updated as part of the updated technical report, which will be finalised by the end of the year. We particularly look forward to demonstrating in that study the upside that WKP represents and how that will fit into the Whyhe plan longer term. The excitement for WKP has also been amplified by the naming of the Whyhe North project last month by the New Zealand government as a potential fast track project. With the latest announcement, we look forward to submitting our applications in the new year as we work towards our permits to develop the project in the coming years. I'll now turn the call

back to Gerard. Thank you, Peter.

So as you've heard, our two largest operations, Hale and McCrae's, representing around 70% of our total production, are performing well and in line with guidance. However, for the reasons mentioned by Peter, we are changing the guidance for both the Dipio and Whyhe. As a result, full year consolidated gold production guidance is now expected to be around 4% below the bottom end of the original guidance range at 480 to 500,000 ounces for the year. This implies that we expect fourth quarter production to be the strongest quarter of the year at between 142 and 162,000 ounces, with stronger production expected from all sites. Corporate production guidance remains unchanged. As a result of the lower expected gold production and the marginal increase in capex, we updated the consolidated full year all in sustaining cost guidance, which is now expected to be $1725 to $1825 per ounce. With a strong fourth quarter production result expected, we also expect fourth quarter consolidated all in sustaining cost to be the lowest of the year at between 1,400 and 1,650 per ounce. Our total capital expenditure for the year has been updated and is now around $25 million or 5% above the original guidance range. It is disappointing to have to change part of our guidance for 2024, particularly as we have delivered on production guidance for each of the preceding three years. Stepping back though, the case for Oceana Gold remains strong. We have excellent organic growth prospects that we expect to be able to fund from substantial operating cash flows

and from a net cash position. In summary,

we remain committed to creating and sustaining a safe workplace for everyone working at Oceana Gold. We have a tremendously talented and committed team who work hard to deliver our results and all shareholders can see today the outcomes of their efforts. We delivered strong production and substantial free cash flow generation in the third quarter, which further strengthened our balance sheet and increased our net cash position. We will continue to progress on our growth options and look to increase returns to shareholders through our existing dividend and now the Shared Buyback program. We expect the fourth quarter to be our strongest for the year with higher production expected at all sites, driving a lower oil and sustaining cost. At today's gold prices, we expect this will translate into another strong quarter of free cash flow generation. We look forward to providing further exploration updates and finalizing the Waihi North Project pre-feasibility study before the end of the year. I'll now hand the call back to the operator and open the line to any questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to current from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from Ove Sabeep at Sposha Bank. Please go ahead.

Thanks, operator. Hi, Gerard and Osana Gold team. Congrats on a good quarter and achieving the free cash flow inflection point that we were all waiting for. Just a couple of questions from me. Number one, Gerard, you have a couple of studies in the pipeline, the Waihi North PFS, that's including WKP, DiDiPO Underground PFS, you've got the Hale Underground Resource Update, you know, including the Leadbetter trade-off study coming up. Just, I want to start off the DiDiPO Underground PFS based on, you know, some of the challenging ground conditions that we, or you guys, encountered within the Breccia Stops in Q2. How is that expected to impact the results of the PFS, if any?

Thanks, Ove Sabeep. Look the DiDiPO study

is

about increasing the rate of haulage of tons from underground, which will have the benefit of displacing lower grade stockpiles. The Breccia Stope area is a subset of the overall feed, and so where we mine from in the mine does not alter the study. It obviously will moderate the amount of high grade material that we bring into the mine plan from, you know, previously over the next few years to probably over the next four to five years. So it spreads out that access to that high grade ore. But pleasingly, the Breccia Stope redesign work makes sure that we get all of that high grade ore. So from a value perspective, the great design work or redesign work that's been done by the team there makes sure that we get it all. But the overall work being done to increase the mining rate is on track, and as Peter said, by the end of this year, we expect to be at two million tons material moved from underground on our way to the target of 2.5 million tons. So in essence, the ground conditions we're experiencing doesn't change our fundamental goal of increasing oil haulage. It just alters the mix of what comes out when. Perfect.

Thanks, Colorado. And just, you know, again, in terms of the WKP and I guess, you know, Wahi North PFS, obviously WKP got onto the fast track this. That was great to see. What are the next steps for WKP in terms of permitting? And you know, how do you see Wahi kind of, you know, fitting into this picture based on the fact that, you know, Wahi has been having issues over the last, I would say a year or two now?

Yeah, look, it's I think when we bring out that WKP or Wahi North Project PFS, you'll see the flight path that we expect for Wahi inside that study. And so you'll see, you know, likely a flight path for Wahi operations that reflect its recent performance plus a bit of expected improvement. But the ultimate goal is to make sure Wahi safely and profitably produces until we bridge into the oil field from WKP. And as it relates to the permitting question, I mean, again, I'll just go to the public comments from the New Zealand government. I mean, we have been added to the list of fast track projects. The government of New Zealand has said they're looking to have that bill enabled or enacted, I should say, by the end of this year. And that would precede or enable, I should say, our submission, formal submission of us being a fast track project early in 2025. The government then goes through that process and we'll all get to see what fast track means. But, you know, our hope is by the end of 2025, we are officially gated as a fast track project and that gives us our consents. And that is our starting point for this project. So in the global context, the New Zealand government is certainly doing all it can to make resource development in New Zealand faster than most other jurisdictions in the world.

Perfect. Thanks for that, Gerard. And just, you know, that's it for my questions, but I just wanted to say congrats to David and the HAIL team for the ramp up at HAIL. Really good to see that.

Thank you. Thank you, Aves. Appreciate it.

Thank you. Ladies and gentlemen, as a reminder,

should you have any questions, please press star 1 now. The next question comes from Cosmos2, Oceanogold.

Please go ahead.

I'm CIBC, so I don't know if that's changed. Hi, Gerard and team. Maybe my first question is on your guidance for Q4. Good to see that, you know, it's going to be the best quarter of the year as projected, but you've still given us a fairly sizable range, 142,000 to 162,000 ounces. You kind of touched on it, Gerard, but could you maybe highlight some of the key drivers that could either push you to the higher end of that range or the lower end of that range?

Thanks, Cos. I got excited for a minute there thinking that you'd joined Oceanogold. Look, I mean, mining isn't mining. We have selected a range that we know we will satisfy, and obviously our aspiration is to be in the upper end of that range. And there's no rocket science here with good access to all from both underground and open pit at all sites, having a plan that we execute on and making sure that, you know, whether it be weather or, you know, the reliability of our maintenance programs to deliver availability in the process plants, we expect to be able to deliver the midpoint or above of that guidance range. That's our goal. But, you know, things can happen, which is why we have a range.

Of course. Gerard, as you mentioned, your two larger assets, Hale and McCrae, they're performing very well. However, DiDiPio and Wahe, there's been some issues. And maybe could you talk about, you know, these issues? You've talked about these issues in detail, but I guess what I'm trying to get to is, at DiDiPio, the Breccia Stoves, the issue with the Breccia Stoves and you needing to change your approach and Wahe, the remnant areas, is that permanent? You know, these changes and approaches, are they permanent? And, you know, to the extent that you can share with us, how will this impact your budgeting for next year as you look forward into 2025?

Sure. Well, I mean, I think every time we learn more about our minds and that will be reflected in the budgets and the forecasts that we give for next year. I mean, I think there's a great story to be shared there at DiDiPio. Basically, you know, the work that is being done is about making sure that we get the most gold out of that mine over its life. And as we explained last quarter, the nature of that area of the mine, the Breccia Stoves, is a little more fragmented, a little more brittle than what exists in the dominant part of the mine, which is the Monzenite Zone. And so what the team have done, they rightly identified that a -fits-all approach to stoping was seductive because it was uniform, but it wasn't productive in terms of getting all the ore out of the Breccia area. So what they've done is size the Stoves appropriately to make sure that it's safe for our people, that we don't have equipment loss, but most importantly, that we get all of that high-grade ore out. So it's actually good mine design. And as I said before, and as we said last quarter, yes, that will spread the amount of high-grade ore feed from the Breccia Stoves over a longer period of time, but we will get it all out. So that's actually good value work from a shareholder perspective. And at Waihi, I mean, I think, you know, you're seeing -on-quarter improvement. I think Peter said we're going to have an even stronger quarter in the final quarter. I mean, it's come out of a tough period of overwhelmingly having to mine in remnant areas with a degree of unpredictability, but I think we're getting to the other side of that cause. And I think you'll see, as I said before, in the Waihi North Project Pre-Feasibility Study, a new, realistic, and more highly confident pathway for delivery from Waihi until we bridge into WKP.

Great. Thanks, Jarrett, once again for answering my questions. Those are the questions I have.

Thank you,

Cos. Thank you. We have no further questions. I will turn the call back over to Gerard Bond for closing comments.

Well, thank you, everyone. That does conclude the webcast and the conference call. The replay will be available on our website later today. On behalf of everyone at Oceana Gold, we appreciate you for joining us and wish you a very pleasant rest of the day. Bye for now.

Ladies and gentlemen, this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.