U.S. Markets closed

Edited Transcript of OGC.AX earnings conference call or presentation 25-Oct-18 9:00pm GMT

Q3 2018 OceanaGold Corp Earnings Call

Melbourne Oct 30, 2018 (Thomson StreetEvents) -- Edited Transcript of OceanaGold Corp earnings conference call or presentation Thursday, October 25, 2018 at 9:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Craig A. Feebrey

OceanaGold Corporation - Head of Exploration and EVP

* Michael Francis Wilkes

OceanaGold Corporation - President, CEO, MD & Director

* Michael Harvy Lou Holmes

OceanaGold Corporation - Executive VP & COO

* Scott A. McQueen

OceanaGold Corporation - Executive VP & CFO

================================================================================

Conference Call Participants

================================================================================

* Chris Thompson

PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst

* Michael Sroba

Macquarie Research - Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, and good afternoon, ladies and gentlemen, and welcome to the OceanaGold 2018 third quarter results webcast and conference call. (Operator Instructions) This call is being recorded on October 25 at 5:00 p.m. Eastern time. I would now like to turn the conference over to Mr. Mick Wilkes. Please go ahead.

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [2]

--------------------------------------------------------------------------------

Thank you. Good morning and good evening everybody, and welcome to the OceanaGold's third quarter 2018 results webcast and conference call. It's a pleasure to be here with you again and to discuss OceanaGold's continued strong operational and financial performance and exciting near term opportunities.

I'm joined today by members of the Executive Team who will provide specific details on our results. With me is Michael Holmes, our Chief Operating Officer, who will discuss our operational results, and what we're expecting in the final quarter of the year. He'll also briefly update you on the expansion project at Haile and the underground at Didipio, both of which are progressing well. Scott McQueen, our Chief Financial officer, is also with us and he will discuss our financial results. As you know, we've been very active with exploration and we will continue to do -- and we continue to have solid results. So with me today to discuss those is Craig Feebrey, our Executive Vice President and Head of Exploration who will discuss those exploration results in New Zealand.

Before I proceed, just the usual cautionary statement noting all references to this presentation adhere to IFRS Standards and all financial figures are denominated in U.S. dollars, unless otherwise stated. Also, please note that the presentation contains forward-looking statements, which, by their very nature, are subject to some degree of uncertainty. There can be no assurances that forward-looking statements will prove to be accurate as future results and events could differ materially. Please refer to the disclaimer on our forward-looking statements in your presentation.

So moving onto Slide 3, I'm more than pleased with our performance in the first nine months of the year. Operations are performing well, delivering on production targets, and generating strong cash flows. And I'm excited finishing the final quarter of the year on a continued positive note.

It's been a year of new achievements opportunity, socially, and financially. In the first nine months of the year, we've delivered robust financial results and accumulated the highest revenue and EBITDA the company has ever achieved over the first nine months of the year. We've continued our strong track record of profitability with solid net profits again this quarter despite 9% lower gold price receipts.

The strong cash flow generation from our business has allowed us to make discretionary repayment of $50 million towards our revolving credit facility in the quarter, while we pay dividends of $12 million. We've maintained a strong balance sheet with total liquidity sitting at $140 million, which excludes $76 million in marketable securities. We continue to deliver strong margins and returns to shareholders and that is and has been a primary objective of our business.

As mentioned, we continue to have significant exploration success, while also reinvesting in our business to expand our operations to deliver both value and growth. Exploration has been an important area of focus for the company and has yielded significant results across our business. More recently, we have discussed some of these results in New Zealand at Waihi and WKP.

And earlier this week, we announced some encouraging results at Macraes where we're targeting another extension to the mine life. Macraes is a very important operation that generates very strong cash flows for our business and yet is overlooked by many in the investment committee. They shouldn't as we will continue to generate good cash flows from the asset, and given its vast resource base, there is a real optionality to further extend the mine life beyond 2021 while maintaining good cash flows.

And finally, on the back of our strong operational performance this year, we have increased our guidance for the second time this year. We are now expecting to produce between 515,000 and 545,000 ounces of gold, while maintaining our all-in sustaining cost range between $725 and $775. The main driver for the guidance increase is related to the continued snug performance at Didipio.

So moving onto Slide 4, on a consolidated basis, our operations produce 406,000 ounces of gold and 12,000 tons of copper after three quarters. As you can see, they're well positioned to come within our revised guidance range. We expect the fourth quarter production to look similar to the third quarter but with a varied production mix. Overall, the third quarter production was down slightly, which we expected and had previously forecast in the market.

The main driver was lower production at Haile on lower grades and mill feed. Mill feed was related to a planned shutdown in July for maintenance and tie-in of the pebble crusher and upgraded tailings thickener.

Our New Zealand operations delivered strong quarter as well as Didipio was consistently strong. For the fourth quarter, we achieved an earnings per share of $0.03 on an adjusted basis with the timing of sales and average price of gold being the main drivers for the quarter-on-quarter decrease, while cash flow per share for the quarter was a solid $0.12, which is in line with analyst expectations.

Overall, we continue to demonstrate revenue and profit growth now, with all four operations contributing strong operational and financial performance. For the nine months of this year, we have posted revenue growth of 23% and net profits of 33% over the same period last year. On a per share basis, we've delivered a 13% increase in cash flows over the same period.

Moving onto Slide 5, for the 34th consecutive quarter, we have delivered a positive return on invested capital, which again reflects how we run our business and how we allocate capital. We are one of the only two gold companies that has delivered a positive return on capital every quarter dating back to 2010.

Meanwhile, our year to date EBITDA margin sits at a solid 49%, which maintains our standing as having one of the highest EBITDA margins in the gold sector. We expect this trend to continue next quarter and beyond, even the low cost structure of our business. We're also expecting lower all-in sustaining costs next quarter.

I'm very pleased with our results, however, we still have room for improvement, especially at Haile where we continue to focus on improvement -- productivity improvements to make that operation run as efficiently as Macraes, which we see as our benchmark for operating efficiency.

We expect each of our operations to operate to the same high standard and we do expect Haile will get there with patience and with strong leadership.

Our business is in a very good place right now. Operations generate strong cash flows and are expandable. I'll now hand over to Michael to discuss the operating performance.

--------------------------------------------------------------------------------

Michael Harvy Lou Holmes, OceanaGold Corporation - Executive VP & COO [3]

--------------------------------------------------------------------------------

Thank you, Mick and hello everyone. I'll spend the next few minutes going through our operational performance. Health and safety, so moving to Slide 7. Health and safety performance remains an important focus our business with our year to date TRIFR rate remained static for the quarter at 4.7, however improving on our last year's quarter 3 performance.

Through the quarter, we threw in some extreme weather events at our Haile and Didipio operations and with excellent site preparedness and weather event management, we ensured that there were no safety or environmental incidents. We continue also to focus on our principle hazard management plans with review and regular orders, including emergency scenarios and drills.

We are always working with our contractors on site to ensure their safety management processes align with ours, particularly when there is a change of contract services, for example, the exploration drilling services in New Zealand.

On a quarterly basis, the Didipio continued its strong safety performance, while we saw a slight improvement at Macraes. We recognize that we need to continue emphasizing safety performance at Haile and we're certainly committed to improving the safety culture there with the rollout and implementation of the behavioral based [active] program during the last quarter and continuing into this quarter. This is the same program that we had rolled out at our other sides.

Several other safety initiatives have been introduced during the quarter as we track the more common types of incidents, particularly focusing on programs for hand injury prevention and the prevention of trips and falls. Body mechanics and movement programs were also implemented to reduce the number of sprains and strains in our workplace.

Moving onto Slide 8 and the operational performance at Haile. As mentioned, production in the third quarter was lower than in the second quarter, which was expected with a lower [ed] grade. In July, we had a major shutdown of the process plant for seven days to tie in the pebble crusher and upgrade the feed well and the flotation tail thickener, as well as carrying out other planned maintenance activities such as installing the new CIL feed box, the SAG discharge screens and feed chutes, and ball mill feed chute, and the surge tank [realign].

This work went well and in fact, since installing this equipment we have achieved daily throughput rates, which annualized our performing at a run rate of 3.2 million tons. We are encouraged with what we've seen so far at the plant as we look to increase the annual throughput rates to between 3.5 million and 4 million tons per year.

Recovery was similar to the previous quarter despite the lower head grade as we drive for operational performance improvements with our current program. mining activity continued to be a focus for us, as we're not achieving the productivities that we expect and are used to having particular at our sites.

Mining activities were impacted by maintenance issues through the quarter for the [Digan] and [Hawlings] plate, which also negatively impacted the unit costs. And towards the end of the quarter, the mine was also impacted by the weather events where we planned the shutdown of the operations for three days to ensure the safety of our people, plants, and equipment.

The management of water was also critical to ensure that there were no offsite discharges, which meant the pits were used to collect water. Subsequent rain events have meant that we were still managing the water onsite and we are still pumping water from the mill's own pit. This has had an impact on our mine rate and as such, negative impact our mining unit costs for the quarter.

Up-skilling the workforce continues to be an important objective and we're actively running recruiting roadshows and recruiting operators from states such as Colorado, Nevada, and Arizona.

[We do this] through further training of our workforce, the strong leadership we have on site and more effective maintenance program. As we mentioned last quarter, we're implementing the Mine Star and GPS and data collection technology designed to monitor and optimize equipment and productivities.

We've also enlisted the assistance of [Lodestrain], a performance management consultant to add bench strength to our current programs. I'm also pleased to announce that the discussions relative to the optimization permit, the [NCIS], which includes the Horseshoe underground, the optimization pit design, and the [associated] infrastructure is continuing and progressing well.

We are working closely with the regulators and particularly the U.S. Army Corps of Engineers to achieve this process. We have recently worked with the Department of Health and Environmental Control, DHEC, who is also a cooperating agency with the permitting processing, to successfully attain two minor modifications to the current power mining permit, and this is for placement of additional TAG (inaudible) as well as a PAG low grade [cell].

Looking ahead to the fourth quarter, we're expecting a strong quarter for production at Haile, at the same time we expect the cost to be lower and fall within our full year guidance range, which will lead to stronger cash flows from Haile to close out the year.

Moving onto Slide 9, we are making very good progress on the plant expansion and install both the pebble crusher and the upgraded tail thickener in the third quarter. We've also poured the concrete foundations for the tower mill and in the process of installing the equipment. We've commenced the foundation work on the IsaMill and expect the tower and IsaMills to be in operation in the first half of 2019.

As we go through the permitting process on the mining front, we have assumed that the Horseshoe Underground will be in operation in 2021 while we proceed with the optimized open it. With the underground and the larger pits, we predict annual production to be over 200,000 ounces a year and in 2021, we're forecasting production of around 190,000 ounces but some ramp up with the operation will be required to get us to the 200,000 ounces a year.

Getting the underground built will also be a very important catalyst for us on the expiration front as we expect to conduct expensive underground drilling programs to target the high-grade zones that we have hit through the surface drilling.

Moving onto Slide 10, you can see some recent photographs of the construction of the tower mill and in the installation of the equipment on the left hand side, and the foundation work of the IsaMill on the right hand side.

So moving to Slide 11 and the Didipio operations in the Philippines. We had another strong quarter of health and safety performance and production from the operation. The Didipio operation continues to be a leader in ESG and continues to win awards for environmental excellence. Just recently, Didipio has won the Philippines Chamber of Commerce and This year's Most Coveted Award for 2018 Excellence in Ecology and Economy Award in the large enterprise category. This is the first time a mining firm has won this award.

Production at Didipio was similar to the second quarter and will improve with increased mill feed that was partially offset by lower grades. The mining of the Breccia Zone from the surface was completed and fully backfilled with cement in the third quarter.

High-grade ore from the Breccia Pit and the underground ore supplemented the mill feed, which was predominantly sourced from low-grade ore stockpiles as we ramp up the underground mine. We will continue to blend the ore from the Breccia zone material for the future processing.

Panel 1 of the underground operation continues to ramp up to design as we completed several stopes, including a double width stope in the [montemya] zone and the first double height stope.

In the fourth quarter, stopping will continue in the montemya zone with a second double height stope and two single height, which are 30 meters in eight. We will commence a redesign smaller profile stope in the Breccia zone, which will take out the [cyto] filled stope.

The water storage stope is nearing completion and this will further assist the water management in the mine as we expand the sloping front deeper into the mine. The primary pumping system is operating at design rates and to expectations. The first real test we had was when we were touched by the recent typhoon and the infrastructure performed as expected.

Costs are also generally in line with expectations thus far and as in the underground operations, ran [our] unit costs drift towards the $36 per tonne as we expect. Hopefully through further efficiencies, such as the optimized mine plans and the stope sizes, like we have done already, with this weekend achieved a lower cost.

Production at Haile is expected to be lower in the fourth quarter. However, we have increased our guidance again for Didipio - sorry, production at Didipio is expected to be lower in the fourth quarter. We have increased our guidance again for Didipio to 110,000 to 115,000 tonnes.

Moving onto Slide 12, here is an overview of what I've just described that we're in the mining operations. So within this slide, we do have the 20 million tons of ore stockpiled on the surface for processing from the open it. The slide shows the decline position of where we currently are in the grey and the stopes, which we've mined in October. The stopes in the pink are the mines that the stopes that will be mined in 2019 and the remaining light blue is the area that will be mined over the life of the mine. You can see the location of the capital pump station and how we're advancing the decline into the construction of panel 2.

You can also see the area where we believe there's additional potential for resources at depth, which will be opened up as we progress further down in the mining front. And we see that has enormous potential for us.

Moving onto Slide 13 and Waihi in New Zealand. The Waihi operation had a strong third quarter on better head grades and slightly better recoveries. Mine productivity continued to improve following the lower equipment availability that we experienced in the first quarter. As indicated by our exploration and news releases, we continue to achieve compelling drilling results at the Martha Project. Craig will discuss the exploration there in more detail. However, we have increased the resource at the Martha significantly and continue to drill from the two underground drill drives.

In parallel, we have the permitting process underway for a ten-year mine life expansion. We have hosted several town hall meetings and received overwhelming positive support from our stakeholders at Waihi and in the region. And in August, the public comment period officially commenced and ran for four weeks, which is the standard length for the permitting process.

During this time, 284 submissions were received, again, with overwhelming support. The Waikato Regional Council and the Hauraki District Council are the registry authorities takes for the approval of our permit pan. In November, they will host a consent hearing and render a decision in the first quarter of 2019. Once the decision is rendered, there is an appeals process that takes place.

The permitting process in New Zealand is straightforward. We've been through this process several times over the past 28 years and the Waihi operation itself has had several cutbacks and underground mines approved over the past 30 years. So this consent is more of the same. It does, however, take time and require strong engagement with the regulatory agencies and other stakeholders.

As the permitting process continues, we will continue to prove up the resource and work on the project study. We do expect production in the fourth quarter to decrease on lower grades at Waihi.

Turning to Slide 14 and Macraes in New Zealand. Macraes had another strong quarter with its health and safety performance, continuing to trend in the right direction. IN the third quarter, grades and mill feeds were similar to the previous quarter, while recoveries remained robust at 86%. Despite the solid third quarter, mining operations, both surface and underground, were impacted by lower equipment availability. This led to a high quarter-on-quarter mining cost.

So far, in the fourth quarter, we're seeing considerable improvements and expect to reduce our unit cost. We do expect production to be slightly better in the fourth quarter as we open up more of the Coronation North Pit. As mentioned in our recent press release earlier this week, we are working on a new mine plan that we believe will further extend the mine life at Macraes beyond 2021. It's still a work in progress, however we are targeting or currently outside of our reserves, but currently located within previously mined pits.

Project teams is also investing a potential underground mine at the Golden Point on the back of the exploration successes we've had over there in the past year. Crag will discuss the exploration opportunities we see at Macraes, and together, we believe that Macraes will continue to deliver strong production and cash flow for many years to come.

I should also point out that Macraes has a large resource with lots of leverage to gold price and the price does return to $1,500 an ounce level. We have about 3.5 million ounces in reserves that become economic. In addition to this, we have the Round Hill optionality.

I would now like to introduce Scott McQueen, our CFO, who will discuss our financial performance. Thank you.

--------------------------------------------------------------------------------

Scott A. McQueen, OceanaGold Corporation - Executive VP & CFO [4]

--------------------------------------------------------------------------------

Thank you, Michael, and hello everyone. As illustrated by both Mick and Michael's comments, the company had another quarter of solid operational performance and this is reflected in our financial results, despite some headwinds from weaker Q3 gold prices.

Staying on Slide 16 here, we see a snapshot of our financial results. Topline revenues for the first quarter was $187 million, a slight decrease on the previous quarter, due mainly to the lower average gold price received and slightly lower sales volumes.

Lower sales volumes have a timing element to them. As you'll note, production was nearly 4,000 ounces above sales for the quarter. For context, the $90 plus fall in the quarter-on-quarter average gold price translated to more than $12 million in quarter-on-quarter revenue and EBITDA impact.

In addition to prices, EBITDA was also impacted slightly by higher cost of goods sold. This reflected the expected reduction in mill grade to both Haile and Didipio, lower plant utilization at Haile, principally related to the pebble crusher installation, but also some weather impacts, along with a general second half trend whereby a higher proportion of our sales mix came from our New Zealand operations.

I'd also like to reiterate the point Mick made earlier that despite the lower gold and copper prices, our 2018 year to date revenue and EBITDA were both records for this point in the year. With the expectation of continued strong returns and margins in Q4, overall, we're very pleased with our financial position and performance.

Moving to Slide 7, which provides another view of cash flow, cash flow generation for the quarter was a solid $64 million, despite the drop in the average gold price and the impact of the sales timing. Another material timing impact was the negative quarterly working capital movement of around $13 million, primarily increased receivables combined with some inventory build as already noted.

You can also see here our investing cash flow was steady quarter-on-quarter. As expected, we saw an increase in our investment and growth projects, which is largely offset by as a reduction in pre-strip costs, which are more first half weighted. I'll provide a bit more data on the split of CapEx by nature and location on the next slide.

Not surprisingly, our financing cash flow was higher this quarter given the $50 million discretionary debt repayment we made, whilst our liquidity remains available. We had sufficient cash to allow the repayment, which will materially reduce our ongoing interest costs.

During the quarter, we also had $12.4 million in dividends. For the last year that takes us to -- year to date that takes us to a total of $18.6 million in dividends, the gain reflecting the strong cash flow generation business.

Moving to Slide 18, includes a bit of additional information on the CapEx profile. In total terms, capital invested in the third quarter was similar to the previous quarter. As I just mentioned, in general terms, relative to last quarter, we could see an increase in the growth CapEx, largely offset by a reduction in pre-strip, general operating CapEx, and exploration spend were pretty flat.

The bulk of the great capital expense spent at Haile and Didipio. At Haile, the focus remains on the expansion activities, while Didipio, the development of the Panel 2 underground continues. Also of particular note was the growth capital spend at Waihi where we continue to invest in the Martha underground development.

In terms of prestrip, albeit it reduced quarter-on-quarter, the main spend was at Haile and Macraes as you would expect. We continue to invest in exploration with much of that spend at and around Haile and Waihi. Craig will discuss in a bit more detail on the positive results that program continues to yield.

Looking at the fourth quarter, we do expect our standing capital to be lower, although we expect to fall and remain within our guidance on the full year. Moving to Slide 19, which covers key features of our liquidity and debt position. Our balance sheet is robust, strong, liquidity and low debt. Over the past year, and even in the last quarter, you can see our liquidity is training higher while debt is being reduced. It's in line with our practice of levering up and we're developing and delevering when the assets are generating cash flow.

As of the end of September, we had $70 million in cash and $140 million in total liquidity, an 18% increased year-on-year, a year during which I might add we reduced debt by over $60 million and paid nearly $25 million in dividends.

In total, we had $150 million of drawn debt and $30 million equipment leases, leaving us with a loan net debt of $110 million. I'll now hand over to Craig to discuss some our exciting exploration results.

--------------------------------------------------------------------------------

Craig A. Feebrey, OceanaGold Corporation - Head of Exploration and EVP [5]

--------------------------------------------------------------------------------

Thanks, Scott and hello everyone. Over the next few slides, I'll focus on our continued exploration success in New Zealand where we've delivered a resource increase at Martha, continue to [operate] high-grade gold mineralization at our newest discovery, WKP, and turn to the mine life extension at Macraes.

In discussing these slides, I'd like to bring your attention to the footnotes about both resources and exploration targets mentioned. Moving to Slide 21 and Waihi, with an oblique section of the Martha Pit, the Martha Underground project on the left.

We continue to drill with nine rigs at Waihi, five in the underground from the 2 drill drives, and four from surface. The focus for us here has been to test the large exploration target and establish a resource within the Martha underground. We're pleased to highlight that to date, drill fans along multiple drill points on the two drill drives have delivered the results we were expecting, intersecting both the main fissure veins of Martha, Empire, and Royal, and additional mineralization in linking structures between these dominant structures.

In July, we announced additional resources at the Martha Underground of 140,000 ounces of gold in indicated category and 339,000 ounces of gold in inferred. You can see from the graph on the right that we're now validating the concept and quickly establishing significant resources. And with over half of the planned current program of drilling still in front of us, we're continuing to look forward to updating the market on progress.

As part of the same news release announcing the growing resource, it's important to note that we also stated a significant increase in the size of our originally outlined exploration target, increasing to between 5 million and 6 million tons at an anticipated grade of between 4 and 6 grams per tonne [rolled]. The reason for the revision is an improved understanding of the nature of mineralization, both for drilling to date and an extensive compilation of historic data.

Just finally on this slide, the development of the 920 drill drive is complete and the 800 drill drive approximately 62% complete, providing additional drill platforms going forward.

Moving to Slide 22 and WKP. The figures on the left highlights the distribution of our pipeline of exploration projects covering around 30,000 hectares in the Coromandel Peninsula. These projects are at various stages of exploration with the discovery at WKP shown in blue, the most advanced and located just 10 kilometers of our Waihi operation.

We're obviously very excited about the exceptional drill results we're reporting from WKP as highlighted here and in our press releases the last several months. Based on those drill results reported to date, we've started to define a major high-grade, gold-silver vein called the East Graben vein that strains over 1 kilometer, is open along strain, and is approximately 5 meters in average width with an average grade of 14.7 grams per tonne gold, and a vertical extent of approximately 200 meters with room to grow. I'll talk to this a little more in the next slide.

Moving to Slide 23. The schematic on the left is a plan view and the reason I'm showing this is that the East Graben Vein located on the right or east of this figure is just one three significant fissure veins shown in red with associated hanging wall and foot wall structures, similar to what I was just describing at Waihi and the Martha Underground Project.

The two other veins are the Western and T Stream Veins. Both are poorly explored with significant upside as is demonstrated by drilling sections to date. The schematic on the right side of the slide is a geology cross-section through the East Graben Vein showing the pierce points of drill holes to date, color-coded by gram meters. That's gold in grams per tonne multiplied by the true width of the vein.

As you can see, all but one hole in the preferred Rhyolite host is above our nominal cutoff of 10-gram meters. Drilling continues off two platforms testing further the 1-kilometer strain in order to establish a resource and advance the project further. Although we're very excited about the opportunity at WKP, it's early days and we have a lot of drilling ahead of us, both on the East Graben Vein and its new neighboring structures.

With that said, this is an opportunity to continue monitoring as we release additional updates and continue to explore this target to its full potential.

Moving to Slide 24 and exploration at Macraes. Our press release on Macraes a few days ago highlighted the exploration success that continues with drill results confirming expectations at targets such as Golden Point. You can see from this slide that we've intersected mineralization in a number of holes extending from the historic Golden Point open pit rim to the East and down dipped along the sheer that is both good width and grade.

These results encourage us to chase resources here that may lend itself to an underground mining operation, as highlighted within the blue rectangle. Going forward, we expect to be conducting further drilling here to test this concept further.

Moving to Slide 25 and exploration at Coronation North. Recent drilling has involved targeting infill programs in support of an updated life of mine plan. Drilling is highlighted here in this aerial view as predominantly within the current pit design and drill results highlighted in the captions and bulleted on the right were in line with expectations and resulted in the conversion of approximately 14,000 ounces in the measured and indicated resource categories.

So that's a brief review of the results of exploration to date at New Zealand. I'd like to hand it back to Mick Wilkes.

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [6]

--------------------------------------------------------------------------------

Thanks, Craig and thank you, Scott and Michael, as well, for those detailed updates. Before we start a Q&A section, I'd like to outline our priorities for the remainder of the year and just leave you with this thought. Our operations are performing well, delivering on production targets, and generating really strong solid cash flows. We expect a strong fourth quarter and are positioned well to achieve our upgraded guidance.

Our organic growth opportunities are all advancing well, while exploration continues to demonstrate that we are operating in prolific gold belts. We will continue to drive further efficiencies at all of our operations, whether it be through productivity improvements or the implementation of technology.

It's been a strong year for the company and we expect will we finish up the year on a positive note. So that concludes the formal presentation segment of the webcast. We'll now take some questions over the phone and I'll turn back the webcast over to the moderate to facilitate. Thank you.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Your first question is from Mick Sroba from Macquarie.

--------------------------------------------------------------------------------

Michael Sroba, Macquarie Research - Research Analyst [2]

--------------------------------------------------------------------------------

Three questions from me. First, you noted that the mining of the larger monzonite stopes reduced the operating mining costs at Didipio during the quarter. What were the key drivers behind the lower processing and G&A costs? And do you see those being sustainable going forward as well?

--------------------------------------------------------------------------------

Michael Harvy Lou Holmes, OceanaGold Corporation - Executive VP & COO [3]

--------------------------------------------------------------------------------

I suppose the main drivers for that was the throughput that we achieved. We're still sort of, I suppose, managing that within the current guidance. And so we're expecting sort of similar or probably slightly higher in the fourth quarter depending on the amount of throughput that we can put through the plan. It's really that production base going forward.

From the monozonite area, the more confident material we've successfully able to look at the increase to the stopes, get some double stopes. And we will continue to sort of work with that. The plan has always been to have a look at single stope sort of mining methodology, but where the opportunity presents itself, we'll take that opportunity.

--------------------------------------------------------------------------------

Michael Sroba, Macquarie Research - Research Analyst [4]

--------------------------------------------------------------------------------

And what percentage of the resource is hosted in that monzonite zone itself?

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [5]

--------------------------------------------------------------------------------

Craig, can you answer that question now?

--------------------------------------------------------------------------------

Craig A. Feebrey, OceanaGold Corporation - Head of Exploration and EVP [6]

--------------------------------------------------------------------------------

Not specifically, Mick, but it would be well over three quarters. I don't have that number.

--------------------------------------------------------------------------------

Michael Sroba, Macquarie Research - Research Analyst [7]

--------------------------------------------------------------------------------

No problem. So just a quick question on Haile. Were the lower grades part of the mine scheduling or was that a reconciliation issue? And are we to expect similar grades for the remainder of the year?

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [8]

--------------------------------------------------------------------------------

No, the quarter that we had -- basically, we're transitioning. So we're coming to the finalization of Phase 1 in mill zone and as we sort of mine through into the snake pit. So it was the mine scheduling. Grades will be improving this quarter.

--------------------------------------------------------------------------------

Michael Harvy Lou Holmes, OceanaGold Corporation - Executive VP & COO [9]

--------------------------------------------------------------------------------

And the reconciliation is very good to date.

--------------------------------------------------------------------------------

Michael Sroba, Macquarie Research - Research Analyst [10]

--------------------------------------------------------------------------------

Okay. Thank you. And my final question on Haile. It seems like operator training is one of the key challenges out there at the moment given the new equipment and some of the issues with availability. Is that right and what are some of the strategies you're implementing to kind of optimize that going forward?

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [11]

--------------------------------------------------------------------------------

It has been I suppose a little bit slower than what we'd hoped to. So as I mentioned, the operators, we've targeted some job fairs at the experienced areas and we're getting some good take up of that. And so those job fairs have been in the likes of Nevada and Arizona.

And so they will continue with that. So we have picked up some more experience as we've gone through, and that's both experienced operators and experienced maintainers. We've got some experts in to do the maintenance review and we've come out with a list of actions there that we're following through. And as mentioned as well from an optimization -- we continue with the training, but also just with the improvement processes.

We have a couple of programs that we're going at site for performance improvement and we're adding some bench strength to that with performance improvement, a company called [Lodestrain]. A lot of activities are happening at the moment. But yes, we are -- one is employing experience into and two is training the people that we have up.

--------------------------------------------------------------------------------

Operator [12]

--------------------------------------------------------------------------------

Your next question is from Chris Thompson from PI Financial. Chris, please go ahead.

--------------------------------------------------------------------------------

Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst [13]

--------------------------------------------------------------------------------

Two quick questions. We'll start off Haile. Just looking I guess forward at the installation of these new mills, first half of next year. Can you provide a little bit of color as to potential for downtime there? What should we be modeling?

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [14]

--------------------------------------------------------------------------------

Well, the overall utilization for the plant is in sort of hedging up towards 90% at the moment. We do have quite a bit of maintenance on these fine grinding circuit that's in there at the moment. And that is also costing us more than it should. So once the new fine grinding circuit has been installed, the existing circuit will be decommissioned, well, will be turned off, not necessarily decommissioned.

And we do expect that the number of times for downtime for that circuit will be much less. We'll allow the process plant to run much more steadily and so we're expecting utilizations around 95% to be the target over the next 12 months.

--------------------------------------------------------------------------------

Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst [15]

--------------------------------------------------------------------------------

Final question just moving onto Waihi, the East Graben. Can you just sketch our - obviously great exploration results. The permitting process, what would be required just roughly, I guess, to develop that as an oil source for Waihi. I mean what sort of timeframe? What are the hoops that need to be negotiated to deliver on that?

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [16]

--------------------------------------------------------------------------------

Well, first of all, it is shaping up as a very good deposit and I'm confident that it will be a mine one day. The development concept is for a fully underground mine, which would have virtually zero impact on surface. And the feed would be tucked back [and] conveyed back to the Waihi process plant, a distance of 10 to 15 kilometers approximately.

We're obviously in the early stages and we are preparing our conceptual development plans with a view to starting the permitting process sometime in the near future. So that's about where we're at the moment. It is very encouraging. It's a very exciting prospect. It could add even more mine life to the Waihi operation as we currently envisage it.

--------------------------------------------------------------------------------

Chris Thompson, PI Financial Corp., Research Division - Head of Mining Research & Precious Metals Analyst [17]

--------------------------------------------------------------------------------

Great. Thanks for that, Mick, and congratulations, guys.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

(Operator Instructions) There are no further questions at this time. Please proceed.

--------------------------------------------------------------------------------

Michael Francis Wilkes, OceanaGold Corporation - President, CEO, MD & Director [19]

--------------------------------------------------------------------------------

Okay. Thank you everyone and thanks for joining us again this quarter. There will be a replay available of our webcast later today on our website. So on behalf of the team, Michael, Scott, Craig, Dan, Jeff, and everyone else that puts this together, on behalf of the team, thank you for joining us. If you have any follow up questions, please do not hesitate to contact the team at Investor Relations. Thanks. Bye for now.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

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