2011 Second Quarter Results Conference Call Presentation
2011 Second Quarter Results Conference Call Presentation July 29 2011 Cautionary Note
Cautionary Notes
The information contained in this presentation is provided by OceanaGold Corporation (“OGC”) for informational purposes only and does not constitute an offer to issue or arrange to issue, or the solicitation of an offer to issue, securities of OGC or other financial products. The information contained herein is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. The views, opinions and advice provided in this presentation reflect those of the individual presenters, and are provided for information purposes only. The presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusion contained in this presentation. To the maximum extent permitted by law, none of OGC or its directors, officer, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation.
This presentation contains "forward-looking information" or “forward-looking statements”, which may include, but is not limited to, statements with respect to the future financial and operating performance of OGC and its subsidiaries, its mining projects, the future price of commodities, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and resource estimates, costs of production, estimates of initial capital, sustaining capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of the development of new mines, costs and timing of future exploration, requirements for additional capital, governmental regulation of mining operations and exploration operations, timing and receipt of approvals, consents and permits under applicable mineral legislation, environmental risks, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Forward-looking information or statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of OGC and/or its affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information or statements, including those risk factors outlined under the heading “Risk Factors” in OGC’s current annual information form filed with Canadian securities regulators on sedar.com. Forwardlooking information or statements contained herein are made as of the date of this presentation and OGC disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as may be required under applicable securities laws. There is no assurance that forward-looking information or statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, no undue reliance should be placed on forward-looking information or statements due to the inherent uncertainty therein.
This presentation does not constitute an offer of shares for sale in the United States or to any person that is, or is acting for the account or benefit of, any U.S. person (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) ("U.S. Person"), or in any other jurisdiction in which such an offer would be illegal. OGC’s shares have not been and will not be registered under the Securities Act.
Cautionary Notes regarding Technical Information
This presentation includes disclosure of scientific and technical information, as well as information in relation to the calculation of reserves and resources, with respect to OGC’s mineral projects. OGC’s disclosure of mineral reserve and mineral resource information is governed by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the “CIM”) Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM (“CIM Standards”). The disclosure of mineral reserve and mineral resource information relating to OGC’s properties is based on the reporting requirements of the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (“JORC Code”).
CIM definitions of the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource”, are substantially similar to the JORC Code corresponding definitions of the terms “ore reserve”, “proved ore reserve”, “probable ore reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource”, respectively. Estimates of mineral resources and mineral reserves prepared in accordance with the JORC Code would not be materially different if prepared in accordance with the CIM definitions applicable under NI 43-101.
There can be no assurance that those portions of mineral resources that are not mineral reserves will ultimately be converted into mineral reserves. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
The estimates of Mineral Reserves for New Zealand were prepared by, or under the supervision of R. Redden, whilst the Mineral Reserves for the Philippines were prepared by, or under the supervision of J. Wyche. The estimates of Mineral Resources were prepared by, or under the supervision of J. G. Moore. J. G. Moore, R. Redden and J. Wyche are Members of the Australian Institute of Mining and Metallurgy and are the Qualified Persons, as defined by NI 43-101. J.G. Moore, R. Redden and J. Wyche have sufficient experience, which is relevant to the style of mineralisation and type of deposits under consideration, and to the activities which they are undertaking, to qualify as Competent Persons as defined in the JORC Code. J. G. Moore and R. Redden are full-time employees of OGC, whilst J. Wyche is a full-time employee of Australian Mine Design and Development Pty Ltd.
For further information regarding OGC’s properties, reference should be made to the following NI 43-101 technical reports have been filed and are available at sedar.com under the OGC’s name: (a) “Technical Report for the Macraes Project located in the Province of Otago, New Zealand” dated February 12, 2010, prepared by R. Redden and J. G. Moore, both of Oceana Gold (New Zealand) Limited; (b) “Independent Technical Report for the Reefton Project located in the Province of Westland, New Zealand” dated May 9, 2007, prepared by J. S. McIntyre, I. R. White and R. S. Frew of Behre Dolbear Australia Pty Limited, B. L. Gossage of RSG Global Pty Limited and R. R. Penter of GHD Limited; and (c) “Technical Report for the Didipio Gold-Copper Project located in Luzon, Philippines” dated October 29, 2010, prepared by J. Wyche of Australian Mine Design and Development Proprietary Limited , J. McIntyre of Behre Dolbear Australia Pty Limited., and J.Moore of OceanaGold Corporation. Each of the authors of the Technical Reports is a “qualified person” for the purposes of NI 43-101.
This presentation uses the terms “measured”, “indicated” and “inferred” resources. U.S. Persons are advised that while such terms are recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize them. “Inferred Resources” have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resources will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred resources may not form the basis of feasibility or other economic studies. U.S. Persons are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. U.S. Persons are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.
Q2 2011 Operational Summary
US$/oz Quarterly Margins
1,600 1,400 Revenue $94.8m @ average gold Cash operating margin $/oz price of $1,546 per ounce achieved Cash operating cost $/oz 1,200 Gold price rec'd (ave) $
- 61,335 oz gold sold at cash
1,000
600 operating cost $921 per ounce
- EBITDA $33.0m
- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
- Didipio Project construction activities
2008 2009 2010 2011
Au oz Quarterly Gold Production
90,000 Reefton Macraes commenced 70,000 Big River (Reefton) early stage 80,000
diamond drilling returned several 60,000 high grade results 50,000
40,000
- Cash @ 30 June $193m
30,000
20,000
10,000
- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2008 2009 2010 2011
Note: All amounts stated in USD unless stated otherwise
Pro forma net cash flow per ounce sold
| Per ounce Au sold | Q2 2011 | Q1 2011 | YTD 2011 |
|---|---|---|---|
| Average Gold Price Rec’d | $1,546 | $1,401 | $1,471 |
| Cash Cost reported | $921 | $687 | $801 |
| Pre strip cash expenditure capitalised to Balance Sheet | $165 | $256 | $212 |
| Total Cost/oz (incl pre-strip ) | $1,086 | $943 | $1,013 |
| Pro forma net cash flow | $460 | $458 | $458 |
- Reduced volume of capitalised pre-strip, resulted in increase of expensed waste stripping allocated to cash cost per ounce sold
- Higher gold price has largely offset higher total costs (quarter on quarter) resulting in pro forma net cash flow per ounce of US$460/oz
A closer look at cash costs Q1 vs Q2
Cash Cost (US$/oz) Analysis - Q1 2011 v Q2 2011
800 108
600 921
- Increase of reported cash cost to $921 / oz for Q2 Lower levels of pre strip capitalised to Balance Sheet (ie higher allocation of cash spend recognised in operating costs in P&L)
Foreign exchange impact
Costs in NZD
| Q2 2011 | Q1 2011 | H1 2011 | |
|---|---|---|---|
| NZD per tonne milled | $36 | $31 | $34 |
- Updated mine plan based on new resource modelling at Macraes
- Mining cost in local currency (NZD) up 16% mainly due to Decrease in capitalised pre-strip Lower productivity at Reefton
- Ramp up of mining rates will lead to improved efficiencies
Operations: Macraes Open Pit & Frasers Underground
| Macraes Goldfield | Q2 2011 | Q1 2011 | Q2 2010 | H1 2011 | H1 2010 |
|---|---|---|---|---|---|
| Gold Produced (oz) | 44,107 | 44,157 | 41,504 | 88,264 | 85,669 |
| Mill Feed (Mt) | 1.458 | 1.457 | 1.337 | 2.915 | 2.627 |
| Mill Feed grade (g/t) | 1.12 | 1.13 | 1.16 | 1.12 | 1.23 |
| Recovery (%) | 84.2% | 83.6% | 83.9% | 83.9% | 82.7% |
- Gold production
- Q2 2011 in line with prior quarter, up 6% vs Q2 2010
- Higher underground grade offset by lower underground ore tonnage mined
- Total material mined up 7% to13.4Mt, vs Q1 2011 due to additional trucking capacity
- Frasers Underground productivity lower due to continued skilled labour shortages
- Mill throughput 1.458Mt at grade 1.12 g/t in line with prior quarter
- Strong process recovery of 84.2% helped by minimal direct leaching
Operations: Reefton
| Reefton Goldfield | Q2 2011 | Q1 2011 | Q2 2010 | H1 2011 | H1 2010 |
|---|---|---|---|---|---|
| Gold Produced (oz) | 17,881 | 21,514 | 26,037 | 33,395 | 47,163 |
| Mill Feed (t) | 462,426 | 419,532 | 401,064 | 881,958 | 746,784 |
| Mill Feed grade (g/t) | 1.42 | 1.84 | 2.25 | 1.62 | 2.34 |
| Recovery (%) | 81.1% | 82.4% | 84.3% | 81.8% | 84.3% |
- Gold production lower with mining rates below our expectations
- Total material mined 3.72Mt, slightly lower vs Q1 2011, transition to owner mining benefits offset by shortage of experienced labour (lower efficiencies)
- Ore grade lower Q on Q due to more low grade stockpiles processed through the mill and negative reconciliation in the ore body model
- Expect mining rates to increase and orebody reconciliation to improve
- Production from Souvenir Pit should lead to higher head grade in H2
- Process plant continued to outperform with strong throughputs (882Kt for H1 2011)
- Recovery 81.1%, slightly lower than Q1 2011 due to lower mill feed grade
Development: Didipio Project
- No LTIs in Q2 2011
- Construction commenced June 2011
- >200 staff inducted (>50% from local communities), to peak ~700 staff in Q1 2012
- Road upgrade and accommodation facilities in progress
- Plant site earthworks commenced, first concrete pour expected Q4 2011
- Tendering for open pit mining contract underway
Community initiatives in Q2 2011 included:
- Two medical missions sponsored, > 500 people treated
- Capacity building agriculture programs conducted in poultry farming, banana production & composting
- Clean water infrastructure upgrades
On track to commission Q4 2012
Didipio Project Progress
Final earthworks underway at process plant site Operations village site clearing commenced
Earthworks underway at process plant site
Re-sheeting of access road underway Gabion baskets at access road drain Exploration: New Zealand
Reefton Goldfield Big River (1,135m drilled, 6 holes completed in Q2)
- Target high grade gold in quartz & sulphide mineralisation
- Assay results for five holes, some with high grade intersections with visible gold
- BR0004 20m @ 8.08g/t Au (true width 15m) from 127m depth
- Including: 6.6m @ 21.37g/t Au (true width 5m)
- Mineralisation open along strike to north, south and down dip, drilling ongoing
Exploration: New Zealand (cont.)
Reefton Goldfield Globe Deeps
- Additional 95Koz Au inferred resource
- Pit optimisation study advanced
- Infill and extension drilling planned
Crushington
- Drilling commenced
- Targeting Au-As-Sb anomalies similar to that at Big River
- Drilling adjacent to historic mines, 4km north of Reefton plant