Company Overview: Oceana Gold Corporation is a gold mining company. The Company is engaged in the exploration, development and operation of gold and other mineral mining activities. The Company's segments are New Zealand, the Philippines, the United States and All other segments. The Company's assets encompass its flagship operation, the Didipio Gold-Copper Mine located on the island of Luzon in the Philippines. On the north island of New Zealand, the Company operates the high-grade Waihi Gold Mine. On the south island of New Zealand, the Company operates the gold mine in the country at the Macraes Goldfield, which is made up of a series of open pit mines and the Frasers underground mine. In the United States, the Company is constructing the Haile Gold Mine, an asset located in South Carolina along the Carolina Slate Belt.


OGC Details

Update on exploration activity at the Company’s Haile gold mine in South Carolina, U.S.A: OceanaGold Corp (ASX: OGC), is engaged in the exploration, development and operation of gold and other mining activities. The company's assets are located in New Zealand, the Philippines and the United States. The company has recently announced for the outcome of brownfields drilling at Haile. The drilling that was undertaken during the past nine months has indicated for results that can enhance the low-cost ounces to the company’s reserves. Particularly, enhanced mineralisation is expected to be of significant potential as realized closer to surface between current pit designs and at depth. There has been 70% growth in the reserves after the acquisition of the Haile Gold Mine in late 2015. About 100 drill holes have been drilled by the company for a total of 26,149 metres at Haile using four surface diamond drills from November 2017. Promising results from extension drilling are expected to provide supplementary ore grade mineralisation between pit designs at low strip ratios. Further, delineation drilling has resulted in assays depicting high grade and continuous mineralisation at Horseshoe underground deposit. Additional drilling has been planned for 2H of 2018 at Ledbetter, Snake and Mill Zone. Additionally, OGC apart from exploration, is expanding the process plant and the company has now fully constructed and commissioned the pebble crusher. The critical processing equipment (Tower and Isa Mills) in relation to expansion and recovery enhancement, has been earmarked for completion in the first quarter of 2019. Therefore, at Haile, the company is on track to commence permitting of the Horseshoe underground and expanded open pit.

Significant upgrade to mineral resource estimate for Martha Project: For the Martha Project at Waihi gold mine (New Zealand), the group has reported for an enhanced mineral resource estimate. Particularly, total Indicated Resource has now moved up by 700% to 0.76Mt @ 5.8 g/t Au, for 140,000 ounces of gold. Further, total Inferred Resource has surged by 250% to 2.49Mt @ 4.3 g/t Au, for 339,000 ounces of gold. Therefore, the company has significantly expanded the Martha Project exploration target, as the results were better than expected. The accomplishment under the drill program has led the company enhance the number of diamond drills from four in number up to six to expedite testing of the Martha, Empire, Royal and Edward veins. Further, numerous linking splays making up the Martha vein system have been under focus and the group revised its exploration target. OGC has also planned to drill as well as explore the highly prospective WKP target, which is some 10 km north of Waihi. Meanwhile, mineralised veins have been identified that sit outside the group’s initial exploration target. Therefore, after incorporating those data and including the recent drilling data, the exploration target has been revised and the group expects a potential volume of between 5 million and 8 million tonnes at a grade of between 4.0 g/t and 6.0 g/t gold for approximately 1,000,000 to 1,500,000 ounces of gold, inclusive of the Indicated and Inferred Mineral Resources.


Updated Martha Project Mineral Resource Table (as of 30 June 2018) (Source: Company Reports)

Robust operating and financial performance in the first half of 2018: In the first half of 2018, OGC has reported strong growth of 45% in the net profit after tax to $89.1 million compared to the same period in 2017. The revenue in the first half of 2018 grew 21% to $402.4 million due to a higher average gold price received and increased sales volumes driven by stronger production from Haile and Macraes. The company has increased the Cash balance by 45% quarter-on-quarter to $128.9 million with immediate liquidity of $148.9 million as at 30 June 2018. Overall during the last 12 months, OGC has  increased the cash balance by approximately 60% and cut the net debt by almost half. For the first half 2018, EBITDA is $210.6 million, that includes second quarter EBITDA of $109.7 million. On an annualized basis, return on invested capital (“ROIC”) in the first half of the 2018 was approximately 10.1%. The company has delivered one of the highest EBITDA margins in the sector and maintained consistent, solid returns on invested capital. Moreover, during the first half of 2018, on a consolidated basis, the company has produced 268,597 ounces of gold and 7,808 tonnes of copper. This is broadly in-line with the corresponding period in 2017, with stronger production at Macraes and Haile offsetting lower production from Didipio and Waihi. In the first half of the 2018, consolidated All-In Sustaining Costs (AISC) were $744 per ounce and cash costs were $445 per ounce on sales of 266,421 ounces of gold and 7,172 tonnes of copper. Meanwhile, in the second quarter, OGC achieved solid exploration results to support a significant expansion of the Waihi resource designed to support the 10-year mine life extension. The company during the second quarter had signed an agreement with Tasman Mining for the development of the Blackwater deposit in the South Island of New Zealand.


Global Mining Company (Source: Company Reports)

Capital Management: During the second quarter of 2018, OGC had amended its Revolving Credit Facility, extended the tenure by one year to 2020 while also revising several financial covenants and reducing facility margins. The company’s total credit facilities stood at $220 million of which $200 million remained drawn. As at the end of the first half of 2018, the company’s net debt position stood at $103.9 million, which is nearly 50% less than the same period in 2017. On the other hand, OGC has declared a semi-annual dividend of $0.02 per common share and CHESS Depository Interests (CDIs).

Strong Second Quarter 2018 Production Performance: During the second quarter of 2018, the company’s gold production was 14% higher to 142,950 ounces compared to the first quarter of 2018 driven by stronger production across all assets. For the second quarter, the copper production was 3,919 tonnes, which was in-line with the previous quarter. In the United States, Haile had produced 75,693 ounces of gold in the first half of 2018, that includes 38,644 ounces of gold in the second quarter. The quarter-on-quarter rise in production is mainly due to improved plant availability and utilisation rates. Recoveries remained steady in the low 80% range and the company continued to make progress with the installation of the upgraded fine grind circuit to further improve recoveries, and the commissioning expected in the first quarter of 2019. Further, in the Philippines, Didipio had produced 58,797 ounces of gold and 7,808 tonnes of copper in the first half of 2018, this includes 33,140 ounces of gold and 3,919 tonnes of copper in the second quarter. The 30% quarter-on-quarter rise in production was due to continued ramp-up of underground operations and the implementation of a revised mine plan. In New Zealand, Waihi had produced 39,320 ounces of gold, including 20,798 ounces of gold produced in the second quarter. This 12% quarter-on-quarter rise in production was due to a better equipment utilisation and higher mill throughput. Additionally, at Macraes, the operation produced 94,786 ounces of gold, including 50,368 ounces of gold produced in the second quarter. The 13% quarter-on-quarter rise in production was due to processing of higher grades and better recoveries.


Growth Opportunities (Source: Company Reports)

Raised the Production range for 2018: For 2018, the company has raised its gold production guidance due to stronger operating performance expected at Didipio and Haile. Therefore, the company’s 2018 gold production guidance range is revised to 500,000 to 540,000 ounces from between 480,000 and 530,000.


Updated 2018 Production and Cost Guidance (Source: Company Reports)

Stock Recommendation: Meanwhile, OGC stock has risen 19.88% in three months as on August 21, 2018 and is trading at a low P/E of 9.66x. OGC’s organic growth opportunities have been seen with significant drivers for the company on the back of the advancement of the permitting of 10-year mine life extension at Waihi, and expansion of the Haile process plant where the pebble crusher is nearly fully commissioned and the permitting for the Horseshoe underground and larger open pit at Haile is expected to commence shortly. Therefore, the company’s operations are performing well, and it has delivered the production targets, and generated strong cash flows. Moreover, OGC is one of the most profitable gold companies in the sector. The company is in strong position to continue to deliver positive results, strong operating margins and profits, and significant returns to shareholders. While the gold prices are under some pressure at the moment, the long term outlook is still decent. Based on the foregoing, we give a “Buy” recommendation on the stock at the current price of $ 4.04.

 
OGC Daily Chart (Source: Thomson Reuters)

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