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Edited Transcript of OGC.AX earnings conference call or presentation 29-Oct-20 9:00pm GMT

·58 min read

Q3 2020 OceanaGold Corp Earnings Call Melbourne Oct 30, 2020 (Thomson StreetEvents) -- Edited Transcript of OceanaGold Corp earnings conference call or presentation Thursday, October 29, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * James Whittaker OceanaGold Corporation - Executive General Manager * Michael Harvy Lou Holmes OceanaGold Corporation - President, CEO & Director * Sam Pazuki OceanaGold Corporation - VP of IR * Scott A. McQueen OceanaGold Corporation - Executive VP & CFO ================================================================================ Conference Call Participants ================================================================================ * Daniel McConvey Rossport Investments LLC - Founder & Portfolio Manager * David Taylor * Michael Parkin National Bank Financial, Inc., Research Division - Mining Analyst * Nick Herbert Crédit Suisse AG, Research Division - Research Analyst * Ovais Habib Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining * Paul Kaner RBC Capital Markets, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the OceanaGold Third Quarter 2020 Financial and Operating Results Conference Call Webcast. (Operator Instructions) Also note that the call is being recorded on Thursday, October 29, 2020. I now would like to turn the call over to Sam Pazuki. Please go ahead, Sam. -------------------------------------------------------------------------------- Sam Pazuki, OceanaGold Corporation - VP of IR [2] -------------------------------------------------------------------------------- Thank you, Toby. Good evening. Good morning. Welcome to OceanaGold's Third Quarter 2020 Results Webcast and Conference Call. I am Sam Pazuki, the Vice President of Investor Relations for OceanaGold. I'm joined today by Michael Holmes, President and CEO of OceanaGold; along with Scott McQueen, Chief Financial Officer; Mark Cadzow, Chief Development Officer; and Jim Whittaker, Executive General Manager of the Haile Gold Mine. Before we proceed, note that the references in this presentation adhere to international financial reporting standards, and all financial figures are denominated in U.S. dollars unless otherwise stated. Also 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 our forward-looking statements will prove to be accurate, as future results and events could differ materially. I refer you to disclaimers on the forward-looking statements in our presentation. I will now turn it over to Michael Holmes. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Sam, and good morning, good evening to all. I hope everybody is staying healthy, and thanks for joining us today to review our third quarter operating and financial results. Moving on to Slide 4. Our third quarter results reflect the impact that COVID-19 pandemic has had on our business. During the quarter, we revised our 2020 outlook, which was driven by lower production expectations out of Haile. We are currently tracking to the low end of guidance at Haile. And on a consolidated level, we expect to produce approximately 300,000 ounces of gold at consequently higher all-in sustaining costs. At Haile, production and costs in the third quarter were below expectations, with positive COVID cases increasing from 2 to over 20 at quarter-end. And with 330 workers self-isolating since the beginning of March, including 220 from the first of July to the 21st of October, this represents 40% of the workforce. Also year-to-date, the site has experienced a 35-year record high rainfall. These factors impacted operational productivity and prevented us from advancing mining rates as originally planned, resulting in delaying access to high-grade ore zones. Uncertainties around COVID-19 remain as cases in South Carolina continue to increase. These are real challenges for the Haile team, but ones they are addressing to safeguard the health and well-being of our workforce and delivering on expectations, which include maintaining higher plant throughputs, improving recoveries and staffing up to counteract workforce disruption due to illness and absenteeism. In New Zealand, Macraes is tracking to their full year guidance of 140,000 to 150,000 ounces of gold. Macraes has bounced back well from the second quarter suspensions, and the team is delivering on all fronts. On the North Island at Waihi, despite the 5-week development hiatus in the second quarter related to COVID restrictions, the Martha Underground is on track for first production in the second quarter of 2021. We have advanced over 2 kilometers of underground development during the quarter and over 5 kilometers year-to-date -- project-to-date, sorry. By year-end, we expect to be developing approximately 900 meters per month. At a total company level, our financial results are consistent with underlying operational performance and broadly in line quarter-on-quarter. A high gold price helped to offset generally lower gold sales as a result of no sales from Didipio and lower-than-expected gold sales from Haile in the third quarter. Quarter-on-quarter, adjusted EBITDA increased from strong production from Macraes and a higher gold price. Subsequent to quarter end, we made the difficult decision to permanently lay off approximately 900 full-time and contract workers at Didipio, given the inaction related to our FTAA renewal and ongoing blockade of the access road by the local government units and the minority of individuals who are ideologically opposed to mining. Our net loss of $154 million year-to-date and $97 million in the third quarter reflects a pretax impairment charge of $80 million related to the carrying value of Didipio. Our third quarter adjusted net loss of $24.9 million resulted in an earnings per share of negative $0.04, which was flat quarter-on-quarter. Cash flow per share was $0.11 year-to-date and $0.02 in the third quarter, excluding the gold presales for each period. Despite the challenging year we've had, we remain committed to delivering the most value to our shareholders over the long term. And we will achieve that by progressing our dynamic organic growth pipeline and executing on our operational plans while managing the continued risks we face. During the quarter, we finalized optimization of the Haile Underground, the Horseshoe Underground at Haile, while solidifying our long-term vision for the asset. Martha Underground at Waihi is progressing well and Golden Point Underground at Macraes, the development will begin this quarter with first production expected in late 2021. Permitting and exploration is ongoing in New Zealand, setting the stage to realize the full potential of the Greater Waihi district. Turning to Slide 5. We have strict protocols in place at all sites to maintain the health, safety and well-being of our workforce. This is a top priority for us. These protocols enforced at all sites and for our corporate staff include workplace health screening, stated shifts, rigorous cleaning practices and working from home where practical or mandated. As at the October 22, the Haile operation has recorded 25 positive COVID-19 cases, including 5 cases in the fourth quarter thus far, with only 1 active case along with another 9 presumptive positive cases under watch currently. Over 330 Haile workers have had to self isolate for 2 weeks at some point in time since the beginning of March, including 120 in the third quarter and 50 thus far in the fourth quarter. The New Zealand government lockdown in the second quarter successfully managed the spread of the virus, and to date, we've had no positive COVID cases at Macraes or Waihi. To date, 30 of our workforce has tested positive for COVID-19, 25 based at Haile, 4 at Didipio and 1 from our corporate team. Despite these challenges, our safety performance remains relatively stable quarter-on-quarter, resulting in the company's total recordable injury frequency rate trending to 2.9 per million hours worked. During this uncertain time, we continue to achieve strong safety results, and we'll continue to do so through strong leadership and communication to ensure the trend continues in the right direction. Moving on to Slide 6. We have operated a sustainable business for the past 30 years by applying robust ESG practices across our business. And this year, we continue to advance key initiatives to keep us at the forefront of best practice globally. We are progressing our approach to climate change with the development of work plans, measures and targets related to this very pressing global issue. This includes our commitment to provide short-term targets in line with the Task Force on Climate-Related Financial Disclosure by the end of 2022 and our commitment to other long-term goals. The work is already happening on how to reduce emissions across our business, particularly as we deliver on our organic growth plans. We are evaluating mine plans and designs within the context of using low-emission fleets, particularly in our underground operation. So the innovation and focus on change is underway. We look forward to sharing more details on our climate change-related work before year-end. In addition, we received assurance on our first phase of compliance with the World Gold Council's Responsible Gold Mining Principles and expect to be in full compliance with these standards by the end of 2022. Our overall ESG performance has been recognized by the major ESG rating agencies. And most recently, we maintained our A rating with the MSCI, an outperformer ranking by Sustainalytics, putting us among the elite ESG performers in the mining industry. Moving on to Haile on Slide 7. Haile, with the many challenges we've faced there year-to-date, continues to see safety improvement. The TRIFR -- total recordable injury frequency rate -- trended lower in the third quarter to 5.4% versus 6.3% in quarter 2. I attribute this to the strong leadership we put in place at the operation ingraining our safety culture that requires continuous employee engagement. The third quarter at Haile was as expected, given the challenges we faced. COVID cases increased dramatically and exceptional rainfall hindered productivity. Rainfall totaled 51 inches through September, the highest amount on record for the last 35 years. Despite these impediments, the team at Haile has kept the operation moving forward in all aspects of the mine activity and project development. 30% of our workforce self-isolated in the third quarter due to the COVID, and positive cases increased tenfold. The disruption in workforce resulted in the haul truck utilization rates of 60% year-to-date, which is much lower than our expectations for the year. Quite simply because of these factors, we were unable to advance our mining rates as expected, resulting in delayed access to the higher-grade ore zones. Production was lower and costs were higher during the quarter. Mining and processing unit costs increased 26% and 23%, respectively, quarter-on-quarter. Higher mining unit costs reflected increasing in -- increasing headcount and training to offset absenteeism impact, a 30% increase in the cost of diesel during the quarter and more drilling and blasting of material in the open pits as the mine plan progresses. Higher milling costs reflect utilization losses from wet in-circuit material plus a 3-day planned maintenance shutdown which was brought forward from October. Quarter-on-quarter, we had quite a bit of noise. But year-on-year, there is a trend of improvement across the board. 2020 year-to-date figures over 2019 results have shown significant improvements in total material mined, all mining increasing, mill feed increasing, recoveries improving and costs improving. We're on the right path at Haile, and despite the detour of 2020, we have not lost sight of the long-term potential of the asset. Turning to Slide 8. Here, you'll see proof of the points related to the challenges we faced in the third quarter and continue to manage at Haile. The reality is that the Carolinas continue to experience record excessive rainfall. And although we had factored in rain when establishing our budgets and guidance, it is a variable that we cannot predict. Despite the rainfall, take note that we are moving more of South Carolina than ever, averaging 3.3 million tonnes per month since the beginning of this year, despite receiving more rainfall than ever we've experienced since the beginning of the operations. We continue to work through expanding the pits and mining through the clays and saprolites to get to the harder rock, which we expect will improve productivity independent of weather events. Concurrently, we've been successful at reducing total turnover to less than 25%, attributable to better recruiting practices and employee targeting as well as on-the-job training. We're also increasing staffing levels to mitigate and manage absenteeism from COVID and turnover. COVID-19 remains a challenge for us as cases in South Carolina continue to escalate. But with our strict protocols in place, we have prevented the spread at site thus far. Notwithstanding the continued risk associated with the pandemic, we expect continual improvement from the team at Haile. Turning to Slide 9, at Macraes. During the third quarter, Macraes operation reported 2 reportable injuries, bringing the year-to-date total to 3. The resulting total recordable injury frequency rate was 2.30 per million hours worked. The operation continues to see a significant reduction in the number and severity of injuries as compared to last year. In the third quarter, Macraes produced approximately 35,000 ounces of gold and increased quarter-on-quarter, as we resumed full-scale mining and processing post government-imposed COVID-19 restrictions in quarter 2. Open pit and underground mining costs generally increased quarter-on-quarter with the resumption of normal operations during the quarter relative to quarter 2. Processing costs also increased quarter-on-quarter due to planned maintenance shutdown completed during the quarter. All-in sustaining costs of $1,482 per ounce sold were noticeably up quarter-on-quarter, reflecting the resumption of the pre-stripping activities relative to quarter 2 and increased sustaining capital spend related to a public road realignment project. The road realignment project is imperative to facilitate the mine life extension to 2028 that we shared as part of our updated technical report. We expect Macraes to produce over 1 million ounces at an all-in sustaining cost of approximately $1,000 per ounce sold over the next 8 years. The development of Golden Point Underground and additional open pit opportunities at Deep Dell, Innes Mills and Gay Tan have increased the mine life. We expect to invest approximately $15 million to develop the Golden Point Underground, which effectively replaces the Frasers Underground, and we will invest an additional $30 million annually in sustaining capital with the open pit expansions. For 2020, Macraes is tracking comfortably within the full year production guidance of 140,000 to 150,000 ounces of gold. We continue to expect the quarter to be the highest quarter of production at the lowest corresponding all-in sustaining costs, particularly as sustaining capital investments taper off. Moving on to Slide 10 in Waihi. Recorded 0 injuries during the quarter, and it's maintaining its total injury -- total recordable injury frequency rate relative to quarter 2. Development in the Martha Underground continues to progress on budget on schedule for the full year despite the temporary curtailment in the second quarter due to COVID-19-related restrictions, with total advance rates continuing to increase. And at the end of quarter 3, we completed 2.2 kilometers of underground development. First production of [staple] from Martha Underground is tracking to the second quarter of 2021. And that will be supplemented with stockpiled development ore as we advance the project. Looking ahead, the processing plant, which was shut down in February after completion of stope mining at Correnso, will resume batch processing this quarter with ore from narrow vein mining in the upper Correnso and Lewis veins. We're expecting 7,000 to 8,000 ounces of gold production from Waihi in the fourth quarter, bringing total production to approximately 20,000 ounces of gold this year. Moving on to Slide 11 in Didipio. Our focus at Didipio is on lifting the operating restraints at the mine and renewing the FTAA. During the third quarter, the community of Didipio held a general assembly on September 10 and 400 community members participated, representing the majority of the Didipio families. The general assembly passed resolutions supporting the resumption of free travel for Didipio mine supplies and product, effectively supporting the removal of the blockade, and requested that Didipio council, which has been active in establishing and maintaining the blockade, support these resolutions. To date, the resolutions of the general assembly have been opposed by the local leader and his coalition on the Didipio council. And as such, the blockade remains in place. Despite the efforts of the General Assembly, the Mayor and the Municipal Council, agreement to remove the blockade and the anti-mining activists manning the blockade could not be achieved. As a result and in accordance with the Philippine labor laws, we terminated the employment of 496 employees and 400 contractors on the 13th of October. This is a very disappointing outcome for us and most especially our dedicated and skilled Filipino workforce, as well as the broader barangay. Didipio is a significant source of jobs, social development, taxes and revenues that we believe will be critical in contributing to the Philippines post COVID-19 recovery. With the permanent layoff of the majority of the workforce, our focus has been turned to transitioning Didipio to a state of operational standby. Our expected time line for resumption to full operations has now extended to up to 12 months, as it would take considerable time and effort to rehire and retrain our highly-skilled Philippine workforce. We continue to seek temporary injunction against the governor's order restraining the operations. We have received word that our appeal to the court of appeals for a temporary injunction has been denied. And we are currently evaluating the option to appeal this decision to the Supreme Court. Concurrently, we remain in dialogue with the appropriate representatives at the national level on the renewed status. And currently, our understanding is the FTAA remains with the office of the President for approval, but we do not have visibility on a time line for action from the President. I will now turn the presentation over to Scott to take you through our financial results. -------------------------------------------------------------------------------- Scott A. McQueen, OceanaGold Corporation - Executive VP & CFO [4] -------------------------------------------------------------------------------- Thank you, Michael, and hello, everyone. The next few slides, as Michael said, will summarize our third quarter financial results. Turning to Slide 12, which provides a snapshot of our balance sheet. As noted, as at September 30, our cash balance was $127 million, while our net debt stood at $187 million. We have been actively managing our liquidity position for some time in response to the suspension of operations at Didipio as well as the planned production pause at Waihi. This has included debt amendments late last year, the sale of our interest in GSV in Q1 and the gold presale arrangements executed to better align our near-term operating cash flow profile with our 2020 capital investment plans. Our 2020 plan included a strengthening operating cash flow consistent with increasing mine grades at both Haile and Macraes across the third quarter and even more so into the fourth quarter. However, the 5-week COVID shutdown at Macraes impacted mining progress, and in doing so, delayed access to some higher grade zones in the context of the third quarter. Haile has experienced similar timing challenges with the management of COVID, resulting in increased workforce absenteeism due to isolations and case management. Again, this contributed to reducing mine productivity and delayed access to higher grade zones in the third quarter. While we have proactively managed the material impact these short-term challenges have had on liquidity, and we expect improved performance in the fourth quarter, the key to realizing the value with AGC is not just managing these short-term risks, but at the same time ensuring we can commit to delivering the significant organic growth projects in our portfolio despite these risks. To achieve these goals, we felt additional equity was the best path, given the increased risk over Didipio timing, while also considering the significant capital investment commitments required to bring these projects to fruition over the next few years. The equity raise announced in September was completed this month, and as noted, total 81.6 million common shares issued for net proceeds of approximately $122.4 million. The completed transaction included the exercise of an over-allotment option of 8.6 million shares. As previously announced, the bulk of the proceeds are earmarked to underpin the Horseshoe Underground mine development at Haile, development of opportunities in the Waihi District, and importantly, also ongoing exploration to further enhance the value already evident in the Waihi region. While we continue to face uncertainty over the trajectory of COVID in the U.S. and broader economic risks remain, we believe we can now move forward with confidence and commitment to delivering operational performance and the significant value-enhancing growth projects, while at the same time retaining their full value and optionality in the hands of the shareholders. Moving to Slide 13 and the financial results summary. The overall third quarter result was a net loss of $97 million, which included an impairment charge of $80 million related to Didipio. This followed the announcement of the planned workforce terminations in the third quarter, first tranche of which occurred in mid-October. These terminations will result in an expected change in the status of the asset, as Michael has explained, effectively -- as previously highlighted, the operation will transition from a state of operational readiness for rapid restart to a reduced status of operational standby. This change is expected to materially impact the time line required to resume full operations subsequent to a resolution of blockade or the decision by the office of the President on the renewal. As such, the carrying value of the asset was reassessed at the end of the quarter to include this change in assumption, and this reassessment resulted in an impairment charge as included in the third quarter results. Carrying value of Didipio will continue to be reviewed based on the situation on the ground and with respect to progress with the FTAA renewal. Should a positive outcome be achieved and the operational ramp up happen more quickly than anticipated, the carrying value may also be reassessed on that basis. Aside from the noncash impairment recognized, the underlying third quarter financial results were consistent with the operating performance during the quarter, and both were broadly consistent with the previous quarter. The year-on-year reduction in both EBITDA and revenue largely reflects the lower gold production and sales at Didipio, but also the planned production pause at Waihi, where there has been no production in the second and third quarters. A marginally higher average gold price realized, combined with stronger production quarter from Macraes, effectively offset the small reduction seen at Haile. The adjusted third quarter result, excluding unrealized gains and hedge gains and the impairment charge, was a loss of $24.9 million or negative $0.04 per share fully diluted. On a quarter-on-quarter basis, EBITDA was largely comparable. The adjusted EPS improved by $0.01 per share, and the cash flow per share before working capital movements was flat at $0.02, bringing the year-to-date total to $0.11 per share. Generally, our financial outlook for the final quarter is materially stronger, based on higher production from both Macraes and Haile, combined with the restart of the plant at Waihi to batch process accumulated narrow vein ore stocks. Based on current gold prices and this improved production outlook, we are targeting a return to underlying profitability in the fourth quarter. As per the cash flow summary at the bottom of the slide, year-to-date operating cash flows increased due to the receipt of $155 million from the previously announced gold presales, which totaled 88,000 ounces. 48,000 ounces are due for delivery in 2020, with the remaining 40,000 for delivery in Q2 2021. During the third quarter, the first 12,000 ounces due this year were delivered. The remaining 36,000 will be delivered in the fourth quarter. The year-to-date investing cash flows reflect increased capital investment for growth projects, partly offset by proceeds from the sale of our GSV investment earlier in the year. The quarter-on-quarter increase in investing cash flow largely reflects increased pre-stripping activities and growth capital at Haile. Cash used in financing of $6 million reflects finance lease repayments, with our debt facilities unchanged during the quarter. Turning to Slide 14, which provides some additional detail on the capital expenditure for the quarter. As outlined at the top of the table, total capital expenditure was approximately $82 million, a 50% increase on the prior quarter. Just under half of the quarter's capital spend is attributable to increased capital investments at Haile, where major works included the completion of the second TSF wall list, commencement of work on the third list plus heavy earthworks related to PAG cell construction. Haile also saw higher pre-strip consistent with the mine plan. Balance was split equally between Macraes and Waihi, both approximately $20 million each. At Macraes, sustaining capital increased with a full quarter of mining, including ongoing pre-strip at Coronation North Stage IV plus the road realignment project being a key feature in the quarter. Waihi included the continued development at Martha Underground, plus increased exploration spend covering both Martha and WKP. I will now turn it back over to Michael to discuss our exciting organic growth pipeline further. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [5] -------------------------------------------------------------------------------- Thank you, Scott. Moving on to Slide 15. During the third quarter, we delivered a comprehensive update of our exciting portfolio with the finalization of the technical reports for our operating assets. The results demonstrate real value over the long term. And we believe delivering our dynamic organic growth pipeline is critical to creating shareholder value. The future of OceanaGold is in 2 top tier jurisdictions, the Americas and New Zealand. Beginning with the growth in the Americas, we finalized the optimization of the Horseshoe Underground at Haile in the third quarter and solidified our view of the asset's long-term potential. We see an exciting underground future at Haile supplementing the open pit operations, and it is our desire through the drill bit to continue to increase the life of the underground project. We envision Haile as a 200,000-plus ounce producer at a sub $900 per ounce all-in sustaining cost, and the near-term investment in waste storage facilities supports this vision and generates active life of mine free cash flows and activates. The company is in the final stages of the Supplementary Environmental Impact Study stage of the process to expand the Haile operation. The SEIS facilitates continued development of the existing Haile footprint, expansion of the TSF and waste dumps and the commitment of the mining from the underground Horseshoe mine. To date, there have been no objections by any stakeholder group to the SEIS. And at this stage, the company anticipates a successful record of decision and completion of the process by the first quarter of next year. The majority of exploration activities are in New Zealand, where we have operated responsibly for the past 30 years, creating significant value for shareholders and socioeconomic benefits for host communities, regions and the country. Martha Underground underpins the great -- the greater Waihi District as we currently see it. It is fully permitted, currently in development and on track for first production in quarter 2 2021. As we develop the Martha Underground project, we will continue to invest in the drill bit. We believe the Waihi District represents the largest value-creating opportunity we have in our portfolio. And exploration is expected to continue for years to come. At Macraes, the updated 43-101 technical report reflected a mine life extension to 2028 with the development of the open pit opportunities and the Golden Point Underground. Golden Point Underground is expected to replace the Frasers Underground and extend the mine life of Macraes at production levels of 150,000 ounces to 180,000 ounces a year and all-in sustaining costs of around $1,000 per ounce. We continue to expect Macraes to be a major source of free cash flow generation for many years to come. Turning to Slide 16 for Haile growth. As I stated before, the exciting future of Haile is underground. During the third quarter, we completed the optimization of the Horseshoe underground including pursuit of a bottom-up mining approach with the use of a cemented rockfill backfill. Portal development for the horseshoe is expected to begin next year with the receipt of the SEIS and first production is currently tracking to 2022 year-end. The Horseshoe Underground is one of several underground exploration targets at Haile, which was recognized as part of the original due diligence. These targets stretch over 1 kilometer from the Horseshoe in the East to the Palomino in the Southwest. In 2016, we drilled the upper portion of Horseshoe with some excellent results that have now converted to a reserve of approximately 0.5 million ounces, along with the substantial inferred component still to be converted at deeper levels. Significant extensions to Horseshoe also remain to be tested, as highlighted in the figure on the left, with 64 meters at 15 grams per tonne of gold. Palomino is -- was the next opportunity to be drilled with a substantial inferred resource of approximately 600,000 ounces being booked earlier this year. As part of this work, we also identified the Snakeshoe and Pisces targets with excellent drill intercepts in addition to a large conceptual target still to be tested, called Aquarius. Each of these substantial opportunities will be advanced over the next several years. In addition to exploring underground, we continue to drill ahead of the open pit operations and expand opportunities at surface. Turning to Slide 17. Martha Underground is advancing to first production in the second quarter of next year and is the foundation asset for a district with enormous potential. Exploration efforts year-to-date at Martha Underground have focused on resource definition in support of feasibility-level studies currently underway. We have not fully defined the resource at Martha Underground to date with additional areas highlighted for further drilling programs and definitions. Located 10 kilometers to the north of Waihi, we continue to believe that WKP will grow into a multimillion-dollar ounce (sic) [multimillion-ounce] deposit, and we will dedicate the drilling resources to highlight this. WKP is a major discovery with a resource of 1.1 million ounces grading between 12 and 13 grams per tonne based on only 35,000 meters of drilling. Throughout 2020, the company has been focused on step out and infill drilling of the Eastern Graben vein to further delineate the resource. Also during the third quarter, the mining permit application for WKP was approved, granting us exclusive right to the WKP mineral resource. We look forward to continuing our robust exploration program there, along with other technical and environmental studies. Turning to Slide 18. At Macraes, development of the Golden Point Underground underpins the mine life extension. Services and earthworks around the portal have already commenced and we expect to begin portal construction for the Golden Point Underground before year-end or early next year. In addition, we are progressing an open pit pre-feasibility study for the Round Hill Golden Point area. As part of this, an evaluation we'll be undertaking a comparison between the underground and open pit mining options for the existing resource. This study is expected to be completed in the first half of next year. In summary and moving to Slide 19. 2020 has been a challenging year. This is not where we expected or wanted to be. I'm sure many of you have reflected on 2020 and feel the same, as we all face an unprecedented global pandemic. My team and I had to make some challenging and courageous decisions heading into the fourth quarter. On October 13, we permanently laid off 496 employees and 400 contractors at Didipio, which was extremely disappointing. Given the impact of COVID-19 on the Philippines, it is hard to understand. We are a responsible contractor to the national government, and we can assist them on so many levels. I use the term courageous because it's not easy to terminate employment of nearly 1,000 Filipinos that I helped hire. As difficult as the process is, it is the right path for OceanaGold. It is the right path for us to take on behalf of each of you as shareholders. 6 days after the permanent layoffs at Didipio, we closed our bought deal offering. And this was also -- this also was not an easy decision for us. We evaluated all options before moving forward. As we close out this year and look to the future, our approach will not falter. We will not deviate from a path that delivers the most value to our shareholders over the long term. And we believe that path means progressing our dynamic organic growth. Looking to the future, we see our most promising growth projects coming online, and we will continue to make the hard decisions to keep us on the right path to deliver enduring value. It has been a difficult year. The uncertainty of Didipio and the conditions at Haile have been challenging. However, nothing has fundamentally changed with our assets. In fact, we are accelerating our exploration focus in New Zealand and at Haile to convert resources to reserves, better define our assets in development and deliver the enormous potential we see today. Nothing has fundamentally changed with our team. We are operating in top-tier jurisdictions with decades of experience. We have all the right ingredients for success. We have a solid plan to deliver on quality assets in top-tier jurisdictions under the stewardship of good management. We expect improved performance in the fourth quarter, and the key to realizing value within OGC is not just managing these short-term risks, but at the same time ensuring we can commit to delivering the significant organic growth projects in our portfolio in face of these risks. We are focused on progressing our growth, which means building 3 underground mines, Haile, Martha and Golden Point, expanding our open pit operations and continuing to explore the Greater Waihi District. We believe this translates to real value for our current and prospective shareholders over the long term. Early next year, I look forward to sharing more details, including our path forward and our vision for the future of OceanaGold. In the meantime, we'll be heads down, executing on the day-to-day and focusing on our path forward to deliver value over the long term. We are a resilient and dynamic gold miner with a strong and sustainable future ahead of us. Our organic growth pipeline is one of the best in the industry, and it represents decades of opportunities for our company, and my team and I look forward to delivering that value. Now back to Sam. Thank you very much. -------------------------------------------------------------------------------- Sam Pazuki, OceanaGold Corporation - VP of IR [6] -------------------------------------------------------------------------------- Thank You, Michael. So that concludes the formal presentation segment of the webcast. I will now turn it over to the moderator to facilitate the Q&A session. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And your first question will be from Ovais Habib at Scotiabank. -------------------------------------------------------------------------------- Ovais Habib, Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining [2] -------------------------------------------------------------------------------- Michael and team, so just starting off at Haile. Based on the implied production needed to meet the lower end of guidance, obviously, Q4 needs to be a pretty strong quarter. Can you give us any color on how Q4 is going based on what you have witnessed in October so far? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Yes. Thanks, Ovais. Look, it has been a challenging year, as mentioned, at Haile, and we are focused on delivering the guidance. We're opening up the areas at Snake Phase II, we're finishing off the Red Hill pit and mining into the Ledbetter Phase I. And so we are actually getting down into the higher grade portions. And October is advancing as per the expectations. This will be an important quarter for us. And it has been the deferral of that high grade, but we're advancing to the expectations to deliver that the lower end of the guidance. -------------------------------------------------------------------------------- Ovais Habib, Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining [4] -------------------------------------------------------------------------------- So then in terms of -- you said that employees that are in quarantine, basically the number of quarantine in Q3 were 160 employees, and then it's come down to about 50. I mean, obviously, then utilization of equipment has moved higher? And has that helped, kind of moved material even further? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [5] -------------------------------------------------------------------------------- Yes. So part of the actions that's been taken on site, and Jim can talk a bit more to this, is that we've actually -- because of the impact of the absenteeism on-site during the third quarter, we've engaged a local labor company that actually has been supplementing the workforce. And so we're actually using a greater pool of people to ensure that we're actually moving through with the number of people on site, which improves the utilization of the equipment. So that has improved. And that's been an action that's been taken on site to mitigate the absenteeism impact of COVID. -------------------------------------------------------------------------------- Ovais Habib, Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining [6] -------------------------------------------------------------------------------- Okay. And just again then, in terms of the amount of tonnes you mined, I mean, it was about 707,000 tonnes of ore at 1.69 grams per tonne, and you milled 864,000 tonnes at 1.26. Can you give us a breakdown of what tonnes and grade came from stockpiles and what tonnes and grade came from the mine material? And I'm assuming you have a high-grade stockpile going into Q4. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes. Look, thanks Ovais, I'll actually hand that question over to Jim with some of the more specific sort of detail. -------------------------------------------------------------------------------- James Whittaker, OceanaGold Corporation - Executive General Manager [8] -------------------------------------------------------------------------------- This is Jim here. Yes, great question. And glad to hear from you again. Yes, the focus is, obviously, as you see, we mill more than the ore mined up to the mill, and that slightly dilutes the tons. We have quite a bit of stockpile, up to about 1 million tonnes at about 0.7. That's why you see that impact. The plan going forward into this final quarter, over 70% of the material is really going to be focused on Snake Phase II and that would be both tons and grade will be higher from that area. We're also about 20% will be from Ledbetter, where we're opening up the center of the mine. The grade is slightly lower, but the ton -- again, about half of what we're getting from Snake Phase II. So we've really positioned ourselves into the center of the ore body, opening up the middle part and connecting Snake and Red Hill. -------------------------------------------------------------------------------- Ovais Habib, Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining [9] -------------------------------------------------------------------------------- Got it. And, I mean, anything you need to do going forward to mitigate the risk of additional wet weather going forward? I mean, is there -- I mean, obviously, we're kind of getting used to the fact that there's a lot of rain in this area, and that has been impacting your kind of mining rates on and off. Is there anything additional you need to do to kind of mitigate that risk? -------------------------------------------------------------------------------- James Whittaker, OceanaGold Corporation - Executive General Manager [10] -------------------------------------------------------------------------------- Currently, what we're doing, we've -- when we were working only in Snake and Red Hill, we were doing a lot of work in doing drop cuts off of the ramps and creating sumps so we could try to channel some of the water into the lowest part of the pits. In Ledbetter, it's a much more wider area. And we found that, that methodology doesn't work so good. And typically, what we're doing now, we're pulling water out of those [threes] areas. We're putting the water into mill zone and mill zone is actually our transfer pump -- transfer point into the water treatment plant system. So really a couple of things. One is active sumping in the lower areas, having a wider area in Ledbetter also helps, but it's part of the mine design. And then the back end of the process plant, which is the water treatment plant, it is very important to us to be able to manage this complete flow of water through the system from the mine into mill zone pit and then back out treatment plant. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [11] -------------------------------------------------------------------------------- I think some other actions we've taken there, Ovais, that Jim hasn't talked about, is just some of the selection of the equipment, so a larger grading fleet to manage post the rain events and allow us a faster reentry time. -------------------------------------------------------------------------------- Ovais Habib, Scotiabank Global Banking and Markets, Research Division - Research Analyst, Mining [12] -------------------------------------------------------------------------------- Right. Right. I appreciate the color on that. And just lastly, Michael, regarding your credit facility, that's due by the end of 2021. Are you engaged with any of your lenders to potentially push that credit facility forward? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [13] -------------------------------------------------------------------------------- Yes. Look, Ovais, we've had a great banking group for a long period of time. And post the equity raise, it is an action that we're following up with Scott and the team to talk with the credit facilities and see what we can do there with regards to pushing that further out. -------------------------------------------------------------------------------- Operator [14] -------------------------------------------------------------------------------- Next question will be from Nick Herbert at Crédit Suisse. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [15] -------------------------------------------------------------------------------- A few from me, please, on Didipio. It's sad to see the layoff of staff there. Just wondering, since that -- has there been any perceptible change in government engagement or sort of -- not at all? It doesn't really sound like there has been any change. But maybe if you could just make a comment on that? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [16] -------------------------------------------------------------------------------- Yes, Nick. Through the quarter, we have had numerous discussions with the government. I've had discussions with the Secretary of the Department of Finance and the Executive Secretary. Trying to get some further color on if there is anything else outstanding that we're required to do with regards to the recommendations that the working group gave to the President, and trying to get a little bit more color on what is happening with the time lines. At this point in time, the President is fairly busy with managing COVID within the country. And certainly, a lot of his support staff are managing that issue as well. We continue to be engaged with the Undersecretaries and the Deputy Executive Secretary of the Office of the President. As mentioned, the renewal is still with the office of the President, and we're still in discussions with them. But unfortunately, we just haven't been able to sort of secure what some of the outstanding time lines might be with regards to the renewal process. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [17] -------------------------------------------------------------------------------- Okay. Understood. And then, do you mind just stepping through the costs from here, sort of the redundancy costs, ongoing holding costs? And if there are any other sort of upcoming decisions points or lumpy payments that we should be aware of? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [18] -------------------------------------------------------------------------------- Yes, sure. so basically with the layoffs will happen in 2 tranches: 1 tranche was the 13th of October, the second tranche will be around the 12th of November. The first tranche was sort of a lot of the flipping our workforce. The second tranche includes sort of more of the senior workforce both Filipino and expat. So total redundancy costs are around about USD 8 million. And you'll see in the third quarter results there is an accrual of $3.2 million. So that we approved for the first tranche in the quarter 3 of $3.2 million, so the remainder of $4.7 million will come through in the fourth quarter if we don't see any advancement on the FTAA before the 13th of November. Ongoing costs then is just around about -- to keep it in the state of operational standby and to ensure that the asset is -- isn't overrun by water. The majority of the cost is in power to dewater the mine, and that's an average cost of around about $1.5 million per month run rate for ensuring that the environmental compliance, the security of the assets and the security of the underground. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [19] -------------------------------------------------------------------------------- Okay. Cool. So that pretty much covers it all. Okay. Great. And then maybe just one for you, Scott. Do you mind just talking through what the assumptions are that underpin that written-down value for that sort of $540-odd million recoverable value you have there at Didipio? Does that assume -- what does that assume for the full reserve recovery? Or sort of what goes into that number? -------------------------------------------------------------------------------- Scott A. McQueen, OceanaGold Corporation - Executive VP & CFO [20] -------------------------------------------------------------------------------- Yes, Nick. It's a fairly, I guess, unique situation. And what's changed? And the reason we had an impairment is probably where to start. Nothing's changed in respect to the renewal process. We're still working through that. We're still engaged with the government, as Michael said. And what has changed materially and is the reason that we reassessed the carrying value was, the trigger being the termination of the workforce and the expectation that, that will extend the time to restart the asset. Now the analysis around the carrying value was based on a scenario -- a number of scenarios, which we feel is the most appropriate way to do it in this instance. And the delay that we're assuming now to start to generate cash flow, again, from the asset beyond our decision to restart has a longer time line to it, and therefore, the discounting factors start to come into it. So essentially, we're using a probability-weighted analysis that now has a longer gap before we're likely to see any cash flow from the asset, and that's what's driving the carrying value assessment. And we'll continue to monitor that as we go forward, obviously, based on changes on the ground. And as I said previously, that we've got an assumption that the full 12 months plus some time for renewal, et cetera, is the current view. If we do better than that, and we do get it up and running sooner, then that carrying value can be reassessed on that basis as well. -------------------------------------------------------------------------------- Nick Herbert, Crédit Suisse AG, Research Division - Research Analyst [21] -------------------------------------------------------------------------------- Okay. Great. And then final one, just a quick one. Would you mind just reminding me around the timing Haile sort of the mining schedule when you get through into that, well, predominant sort of harder ore zone. Is that sort of a Q1 next year? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [22] -------------------------------------------------------------------------------- Yes. Nick, there's a phased approach with regards to the, opening up the Haile ore bodies. The ultimate pit sort of includes 6 ore bodies, and we've sort of -- we've opened up Mill Zone as we do future cutbacks with Mill Zone Phase II, we've opened up Snake I and are currently opening up Snake II and are opening up Ledbetter I. So there'll be different phased approaches with regards to those zones, and that will happen over the next 5 years. But the idea is that with -- sorry, over the next 3 years. But the idea is that as we sort of open up larger areas, Jim's explained with Ledbetter in the surface area and getting into the harder rock, we've got a lot more optionality there. And so the impact of the weather with the harder rock as we open up the pits in Snake Phase II, Ledbetter Phase 1. The cutbacks then don't -- won't have as much impact with regards to the weather, as we'll have alternative places to mine. But from a mining -- a pure mining point of view, we'll see those -- the softer material to be continued to mined into 2023. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- The next question will be from Mike Parkin at National Bank. -------------------------------------------------------------------------------- Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [24] -------------------------------------------------------------------------------- On Haile, just flipping back to Slide 8. I just wanted to -- you've got that line in there at 35-year monthly. Can you just remind us what the technical report kind of assumes what your budget process? I don't think you used the 35-year average, if I recall correctly. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [25] -------------------------------------------------------------------------------- Yes, Mike. Just trying to remember, we've basically used around about a month of rain impacts in our budgeting process, a 35-year history, basically doubles that amount of impact. So it takes it up to around about 55 sort of days. So we've historically sort of haven't looked at the 35-year extreme events. We've taken the last sort of or previous to 2018 and '19, that's taken the last sort of 10-year average, which is a start of being around about that 4 to 6 inches a month. So we're seeing some excessive. So going forward, part of the process that we have done is we've sort of taken that into account. We've built some additional rain-affected days in 2021. We've reduced the total amount of material mined, as we've highlighted in the technical report, down to 45 million tonnes from that 50 million to 55 million tonnes going forward. So what we are doing is we're accounting for that. We haven't sort of finalized the budgeting process this year to understand some further sort of risks and risk mitigation around how we manage the total process and having a core. So we'll evaluate that towards the end of the year, beginning of next year with our guidance reset, but we've certainly in the NI 43-101 positioned ourselves to actually understand that and better management, but as well as the management of the impact of the rain on certain facilities and certainly, the clays and the saprolites. -------------------------------------------------------------------------------- Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [26] -------------------------------------------------------------------------------- Right. And if you go back kind of a year plus, there's a pretty dramatic improvement there on tonnage despite what's clearly still rainy weather. Is that a function of just getting the open pits opened up, but also the benefit of the new mine fleet that was coming into service around that time? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [27] -------------------------------------------------------------------------------- Yes, Mike, it has been a bit of both. Basically, we've -- we initially just sort of paid back the purchase, the 2 areas we used were sort of little -- a little smaller pits into Mill Zone and then Snake pit. And during this process, we've said to uncover the ore body and unlock the value, we need to move a lot more dirt. And so we reflected on the previous fleet and then that upgraded the fleet, basically doubled the size of the fleet, and hence, we've been able to double the movement and still looking for improvement on top of that. -------------------------------------------------------------------------------- Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [28] -------------------------------------------------------------------------------- Okay. Just looking at the other chart there, the 12 months rolling average employee turnover, obviously, a good improvement from a year ago. But if it's still sitting north of 20%, as I recall from past mine tours, there's a partial kind of drive of just a safety culture decision of management saying, you're not fit to work your -- kind of if you don't want to wear your safety goggles and that kind of thing. Is that still the case of why you're north of 20%, you're still seeing a bit of a safety culture unwillingness to adopt the standards that you guys are trying to implement to keep your workforce safe? Or is there another dynamic that's kind of taken over as the dominant one causing the turnover? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [29] -------------------------------------------------------------------------------- That is a good question. Just with regards to the safety, and if you haven't [yet looked at] the figures in the total recordable injury frequency rate improvement, there's certainly been -- and certainly a reduced turnover assist there. This has been an enormous improvement. Sort of from the '18s and -- well, '14s to '18s, when we first started the project back down to now the 5.4, which has been a great improvement. So there's a lot more buy-in by the workforce at this point in time, and that's been fantastic. Predominantly what we're seeing, and Jim can sort of answer a little bit more to this, is that there are a few people that still aren't taking up our belief on the culture of safety. And so the percentage of sort of employees that leave generally due to personal reasons, as are employees that are terminated would probably, I think, be around the a 50-50 percentage. So we still have active management of people on site. -------------------------------------------------------------------------------- Michael Parkin, National Bank Financial, Inc., Research Division - Mining Analyst [30] -------------------------------------------------------------------------------- Okay. So adjusting for that, it's pretty kind of normal rate. Okay. That's it for me. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Next question will be from Daniel McConvey at Rossport Investment. -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [32] -------------------------------------------------------------------------------- A couple of questions. Didipio, remind me, is there any -- do you have any option to go to arbitration if necessary? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [33] -------------------------------------------------------------------------------- Daniel, thanks for that. Look, the arbitration in the contract, it is an FTAA. It is the first FTAA that the government is renewal -- the government is working through. There are conditions within the FTAA that have default and ... -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [34] -------------------------------------------------------------------------------- Just remind me, Mike, what the FTAA stands for? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [35] -------------------------------------------------------------------------------- Financial and Technical Assistance Agreement. So basically, we're -- we provide finance and the technical expertise to the government to extract the resources. And it's a 60-40 split after the cost of capital. So we're fundamentally being a contractor to the government. And yes, there is -- and with every contract, there is the ability to go to arbitration, yes. -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [36] -------------------------------------------------------------------------------- Okay. Great. Second, for Haile, maybe a simpler question with the water issues. I guess I've not been there. It sounds like it's a trickier -- it's unlike most North American mines, in terms of mining in wet weather because of the saprolites. Can you maybe just explain why it's more difficult in heavy rainfall than it would be elsewhere in North America, if that's the case? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [37] -------------------------------------------------------------------------------- Like I -- Jim -- I think Jim is living it. So I might sort of hand that one over to Jim, just sort of run through sort of what -- where the areas of concern are and how they're mitigating and managing that. -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [38] -------------------------------------------------------------------------------- Okay. Good, and part of it might be around the kind of rock ... -------------------------------------------------------------------------------- James Whittaker, OceanaGold Corporation - Executive General Manager [39] -------------------------------------------------------------------------------- Yes. It's definitely around the nature of the rock. I mean, we've been basically mining or developing this site through initial pioneering down through the upper levels of the open pit mine, and you'll find a lot of sands, a lot of saprolites. And then a lot of compressed material looks very competent. And some of it, we actually have to blast. But when you start to drive trucks over it and rainfall, it just really turns into mush. So there's a lot about just getting through these upper layers, getting down to a firmer base and more competent material. And that is the benefit of opening the pit up in the center, which is so that better pit. So typical conditions, as Michael mentioned, we've had to bring in heavier grader equipment. We've looked at ways to keep sumps active. It's not typical. I've worked in some very, very wet mines in frontier of -- in the highlands of Peru. It's quite a bit different, where the water can be trapped in long-term permanent sumps and rock and pumped out. We're really -- we're mining through these benches and trying to sump into them, trying to connect the sumps and really just chasing around this perch water. So it is quite a bit different than other sites that I have seen in extremely wet conditions, where it's quite -- you have -- as you're pumping in [some certain state], you can readily manage the water. In this case in Haile, we spend quite a bit of time trying to chase it through these sand layers. -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [40] -------------------------------------------------------------------------------- As time goes on, will you -- and you open the pit up more, you'll be more into the base, into the harder rock, and this will be less of an issue? Is that a fair statement? -------------------------------------------------------------------------------- James Whittaker, OceanaGold Corporation - Executive General Manager [41] -------------------------------------------------------------------------------- That's correct. I think it was -- Michael brought it up previously. When we look at our longer-term stage plan and we actually look at our longer-term pit plan, we're tracking the amounts of material in our block models by sands, by saprolites by film materials and also by what we call competent rock. We're expecting right now, we're somewhere between, say, 60% to 70% competent rock. That will get up into the 80s past 2023, and then it remains fairly constant as you're down into the deeper areas of the pit. So we -- obviously, we do expect this to improve in time. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [42] -------------------------------------------------------------------------------- Also, Daniel, will -- sorry, also, Daniel, just also adding to that, the advantage of going underground as well. And so you're looking at sort of -- it's relatively -- the competent rock is relatively dry from our geological and hydrological drilling. And so getting the underground up and running and then sort of having a sort of a base of production from underground of that 90,000 ounces per year, certainly assists. And then for us, that future is how do we expand that underground to sort of continue that 90,000 tonnes -- ounces a year of gold production for greater than 5 years and match the underground life to the open pit life, and that's the potential that we see as well. So that sort of decouples the weather events from a great proportion of the underground of the mill feed. -------------------------------------------------------------------------------- Daniel McConvey, Rossport Investments LLC - Founder & Portfolio Manager [43] -------------------------------------------------------------------------------- Great. It sounds like there's a bit of a learning curve, though, just on the open pit in terms of going through this stuff because it is -- it isn't standard. But on the underground, the underground is obviously going to be almost 100% in the competent rock. Is that ... -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [44] -------------------------------------------------------------------------------- That is correct, yes. Yes. Look, that -- yes, 100% in the competent rock. That's right. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- (Operator Instructions) Our next question will be from David Taylor at Taylor Asset Management. -------------------------------------------------------------------------------- David Taylor, [46] -------------------------------------------------------------------------------- I've got more of a statement than a question, but I'd love to hear your comments afterwards. I'd just start off by sort of stating the obvious at the performance. I mean, this is -- it's just been complete disaster. I mean, this might be one of the worst-performing gold stocks in the galaxy. And I found it frustrating your comment when somebody asked you about Didipio on what happened and your response was that the President has more things to worry about like COVID. And when I sort of think about -- I mean, I've been a long-term shareholder, both institutionally and personally. And I think about different strategies here. You could have either been proactive or reactive and proactive strategies in the Philippines could have involved some of the things that Mick talked about in the past, like a dual listing or selling a piece of the asset to a local, we're selling the asset outright. Local sponsorship or local board members having somebody influential on your side, you clearly didn't have the right people who didn't have the ear of the President's office Instead of being proactive, you guys were reactive, and you relied on the courts. You always believe that the Philippines was a land of courts and land of laws, but you lost at the local level, you lost at the provincial level. And now I sort of listen to what your strategy is, and your only strategy is relying on the Supreme Court, but you've lost at every court level, which, to me, I think that's naive. And it leads me to believe that there's more to it than COVID and the President having other things to worry about. I believe that the local governor, who's anti-miner, is looking for a bigger piece of the pie, has the year of the President's office. And if your only strategy is relying on the Supreme Court, you're going to lose like you've lost at every single court level. So my guess, my question is, what are your alternative strategies here other than just relying on the courts where you've failed in the past? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [47] -------------------------------------------------------------------------------- Yes. Look, thank you for that, David, and we are essentially frustrated with the process. The court of appeals and the Supreme Court process that we're looking at, it's really just about the injunction, about the barricade. So that doesn't have any impact on the FTAA. It was more about the injunction for a quick resolution to the barricade. We were planning to actually pull that from the court of appeals before the result. But just due to the process, we sort of missed that window to do that. So we're still considering that. We still have the major appeal through the regional court, basically on the validity, which is the initial case. So that's something that we're still going through. We've got to the office of the President, and it has taken us a while, and we're still with the office of the President. So while we're still seeing positive action with regards to that, we haven't had any sort of negative comments back, and then we're still in discussions with the government. So we're still considering that is the pathway forward, and we've had to make some difficult decisions with the workforce. So we're not relying on the courts with regards to the FTAA. We're relying on the discussions with the President and the work that we've done and showing the government and the President that we're responsible gold miners. And so there is still activity there. I mean, it is still the first FTAA, and we're still working with the group to ensure that we understand their frustrations because we're living with those frustrations every day. We understand the asset is a lot more valuable in [our] hands. But if this -- we have some definite trigger points to have a look at what else we need to do if things sort of advance or don't advance. And we'll be sort of -- we'll be continuing to review those as we move forward. But for us, it has been -- the FTAA has been taken back down to the working group and has been recommended by all the departments, the Department of Finance, the Mining and Geosciences and the Bureau and the Department of Environment and Natural Resources have all recommended us as the -- us and the FTAA should be rolled out on the same term. -------------------------------------------------------------------------------- David Taylor, [48] -------------------------------------------------------------------------------- You had a letter from the finance minister that says you could operate without an FTAA, and I mean that paper proved to be completely worthless. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [49] -------------------------------------------------------------------------------- Yes. No, that's -- we had a letter from the Mines and Geosciences Bureau, not the Department of Finance. -------------------------------------------------------------------------------- David Taylor, [50] -------------------------------------------------------------------------------- Yes. Well, I understand there's continued dialogue, but I guess if the President was to do something, he would have done it before you were required to fire -- or before you fired, basically let all the employees go and the fact that you pulled, I understand you pulled from the appeals before there was a decision. But let's be honest, I mean a year went by before the appeals court even -- I mean, they never even decided on the case. -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [51] -------------------------------------------------------------------------------- That's correct. And we're still working through, David. And for us, it's still in the state that we're still talking to the Executive Secretary and the department -- the executive secretary's department. And we're still sort of having positive engagement there. And so we're still working towards finalizing the FTAA and moving forward. -------------------------------------------------------------------------------- David Taylor, [52] -------------------------------------------------------------------------------- Okay. Then just my last question then, other than you being a bunch of Australians trying to negotiate in the Philippines. Maybe you can talk about who do you have with senior standing in the Filipino community that is working on your behalf to get the ear of the President? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [53] -------------------------------------------------------------------------------- Yes. So as -- we've got an internal resource, the President of OGPI in country, and we're working with some of the Congressmen and the Governor of the supportive province working with those 2 or 3 people that have got a long sort of standing histories and great relationships with the government officials. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- There no further questions at this time. -------------------------------------------------------------------------------- Sam Pazuki, OceanaGold Corporation - VP of IR [55] -------------------------------------------------------------------------------- Operator, I do believe there's one more person queued up to ask a question. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- Our next question comes from Paul Kaner with RBC Capital Markets. -------------------------------------------------------------------------------- Paul Kaner, RBC Capital Markets, Research Division - Analyst [57] -------------------------------------------------------------------------------- Yes. Michael and Tim, just a quick one for me. Just on your hedging profile, could you maybe just outline your strategy there and how many ounces you plan on hedging going forward in the near term? -------------------------------------------------------------------------------- Michael Harvy Lou Holmes, OceanaGold Corporation - President, CEO & Director [58] -------------------------------------------------------------------------------- Yes. Look, Paul. At the moment, I think we've got around about 27 -- or 29,700 ounces hedged in New Zealand at the New Zealand $2,000 put option. And the rest have been the presales, the 2 tranches of pre-sales. Historically, we've hedged just the Macraes ounces and to ensure that we have a good margin as we operate within Macraes. It has been a very low mining and milling per tonne, right, but a lower grade. So it's really been to ensure that we get a return and a good margin from the Haile -- the Macraes operation. We don't have -- that's probably the way that we look at hedging at this point in time, and we don't plan to sort of do any hedging in the future. We have to deliver into the gold presales, as Scott had mentioned, and that's sort of been delivery in this quarter, and we pushed this quarter and then quarter 2 of next year. -------------------------------------------------------------------------------- Operator [59] -------------------------------------------------------------------------------- There seem to be no further questions at this time. Please proceed. -------------------------------------------------------------------------------- Sam Pazuki, OceanaGold Corporation - VP of IR [60] -------------------------------------------------------------------------------- That concludes our webcast and conference call. A replay will be available on our website later today. On behalf of Michael, Scott, Mark, Jim and the rest of the team, thank you for joining us. Bye for now. -------------------------------------------------------------------------------- Operator [61] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes your conference call and webcast for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.