Company Overview: OceanaGold 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

OGC is a multinational gold mining and exploration company that has been listed on ASX and on Toronto Stock Exchange since June 2017 and was listed on New Zealand Stock Exchange from 2004 until 30 December 2016. Its portfolio consists of major projects like the Macraes Operations, the Didipio Operations, the Waihi Gold Mine Operation and the Haile Gold Mine Operation. It has a pipeline of some major exploration opportunities. For the sixth consecutive year, the Company achieved its full year production and cost guidance. The Company is working towards its vision to be the Gold Mining Company of choice within communities, governments and investors by improving its social performance. The Company will continue to leverage its 28 years of operating experience and will identify new-value-creating opportunities in the Americas, Australasia and Asia-Pacific regions.
 

Growth Opportunity Model (Source: Company Reports)
 
Key Updates: OceanaGold Corporation will release its financial and operational results for the first quarter ending on 31 March 18 on 26 April 18. The Company disclosed to the ASX under the appropriate listing Rule that one of its directors, Nora Scheinkestel was appointed on 1 April 18 and holds 26,000 ordinary shares of the Company. The Company commenced its permitting process for Martha Project at Waihi; while Haile Gold Mine is expected to increase the gold production year on year by 20 to 25 per cent. Primarily, OGC’s latest performance has been driven by Haile’s First Quarter of Commercial Production. The Company also updated its 2018 capital expenditure program which included capital investments for growth initiatives.

Overall Performance of the Company: In 2017, the Group delivered a record year of financial and operating performance. The Company reported revenue and net profit after tax of $724 million (an increase of 15. 2 per cent over the prior year) and $172 million (an increase of 25.9 per cent over the prior year), respectively, for the period ending 31 December 17. In 2017, the Company achieved its full year production and cost guidance. It produced 574,606 ounces of gold which was in line with the full year guidance range of 550,000 to 600,000 ounces of gold and produced 18,351 ounces of copper which was also in line with the full year guidance. For the full year, the Company recorded an AISC of $617 per ounce and cash costs of $347 per ounce. The Net Tangible assets per security in 2017 was $2.42, against $2.19 in 2016.
 

Production and Cost Summary (Source: Company Reports)
 
In January 18, the Company maintained its pro-rata equity share of 15.6 per cent in Gold Standard Ventures Corp (GSV) by way of private placement. On a consolidated basis, the Company’s total proven and probable Reserves stand at 5.88 Moz of gold, 3.57 Moz of silver and 0.15 Mt of copper as on 31 December 17. Year on year, the gold reserves increased by 17 per cent or by 0.84 Moz (net of mining depletion and are inclusive of the result of the Haile Optimisation Study) as compared to the prior year. As on 31 December 17, 9,622,537 of the performance rights were issued and outstanding. The Company repaid $84 million of debt and reduced the level to $167 million after paying dividend of $12.3 million. The Company declared an ordinary semi-annual dividend (unfranked) of $0.01 per share which will be paid on 27 April 2018.

Advancement at Martha project for deriving value: Exploration activity has continued in proximity to the Martha open pit and Martha Underground resource of 157k ounce, with 45 drill holes for a total of 13600 meters has been completed till date. OGC will continue to drill from two exploration drives beneath the Martha Open Pit for resource conversion with upwards of 100 km of additional drilling likely to be required to test the full extent of the mineralised system, in the next two years. The resource is associated with Martha, Edward, Empire, Royal and Welcome veins located beneath the existing Martha Pit. OGC also aims to unlock value from Round Hill and Golden Point Resource through relocation of plant mine.
 

Ore Reserve Estimate for Waihi as at December 2017 (Source: Company Reports)
 
Drilling Update: As at 31 December 17, over 905,000 metres, that is 7,075 holes have been drilled from the surface at the Macraes Operations; and in addition, over 63,500 metres have been drilled in 340 exploration diamond drill holes from the Frasers underground mine since late 2008. During 2017, resource development and exploration drilling were ongoing at the Macraes Operations. Holes generally have been surveyed at 25 metres’ intervals. In 2018, further resource development and exploration drilling is planned at Deepdell, at Golden Point, at Coronation North and at Coronation and Frasers West. As at the end of 2017, the underground mine at Didipio is still under the development phase and the underground mine development is planned to be completed in the year 2032. At Waihi Brownfields, underground drilling for the resource conversion of the vein systems that is associated with the Correnso deposit is on-going and during 2017, OceanaGold completed 38,586m of drilling and plans to continue the diamond drilling for the calendar year 2018.

Exposure to Risks and Opportunities: While the company says that there is no assurance to continually produce gold in a successful manner, meet gold production forecasts, bring new gold and/or gold-copper mines into production; the Company’s ability to sustain or increase the current level of production is dependent on the continued economic operations and development at its Haile, Didipio, Waihi and Macraes operations. General sector driven risks relating to costs, changes in the commodity prices, adverse currency fluctuations, labour shortages or other factors hover around the Company’s business and financial conditions. Nonetheless, the Company continues to pursue and review internal and external growth opportunities to enhance shareholder wealth while it intends to stay disciplined in its use of capital and investing in growth opportunities to align with the corporate strategy of investing in high quality assets. The Company’s objective of producing 480,000-530,000 ounces of gold and as well as 15,000-16,000 of copper in 2018, will be achieved only if the Company continues to operate its existing producing assets in New Zealand and in Philippines at a similar scale. There are concerns regarding the success of the appeal relating to the suspension of the operations at Didipio, and a prolonged suspension of the operations may affect the financial performance of the Company. Nonetheless, the Company’s revenues, profitability and viability depend upon the market price of gold and copper and any significant change in the prices below the Company’s production costs for a sustained period would impact the actual and anticipated profits, cash flows and operations of the Company.
 

Cash Flow Outlook (Source: Company Reports)
 
Positive Outlook for 2018: OGC has advanced its plans to extend the mine life at Waihi through successful exploration and the permitting process has already commenced recently. It has also advanced the Haile expansion and permitting process is slated to commence from the second quarter of 2018. The Group is planning to increase the reserve base (net of depletion) while identifying the new exploration targets which will further increase the Company’s resource base. It will continue to work closely with the stakeholders in the United States, in Philippines and in New Zealand. OceanaGold will also pursue other growth opportunities via accretive investments in high exploration, in production of assets that would complement its existing portfolio of assets and in diversification of its business which will help in mitigating the risks that will strengthen the Company’s profitability.
 

High margin Growth Opportunities (Source: Company Reports)
 
Stock Performance: The Company continues to pursue and review internal and external growth opportunities that would further enhance the shareholders’ wealth. The Company will remain disciplined in using its capital and investing in growth opportunities and will convert opportunities that will align the corporate strategy of investing in high quality assets. Fluctuations in the commodity price market creates an uncertainty in relation to the demand which may affect the stock price movement. The Company continues to strengthen its Balance Sheet through regular repayment of debts and continues to provide returns via payment of dividends. Further, the group has continued to deliver strong margins and returns. It recorded 12.2 per cent of ROE in 2017 and 11 per cent in 2016; and Debt to Equity ratio in 2017 was 0.16 against 0.24 in 2016. It remains focussed on maximising the profitability of its current assets and focuses on maintaining the high margins and strong returns. The group’s gold mines have decent current mine life with Haile extending to 2034+ and its permitting is expected to commence in Q2/18. The group is also making efforts to advance the Martha project to deliver incremental 10 year mine life extension. In the past three months, the stock price was up by 10.19 per cent post a one year fall of 16.6% (as at April 10, 2018) paving room for upside potential with fundamentals positioned well. By looking at the overall performance and keeping in mind the commodity price market scenario, we give a “Buy” recommendation at the current market price of $3.60
 

OGC Daily Chart (Source: Thomson Reuters)

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