OceanaGold started life almost 30 years ago on the South Island of New Zealand with the Macraes Goldfield, which remains the largest gold producing operation in the country. The company was publicly floated in 2004 and has opened three further mines across the world since then, with the most recent being the Haile Gold Mine in the US. In between its oldest and newest mines, OceanaGold built the Didipio Gold and Copper Mine in Philippines and purchased the Waihi Gold Mine on the North Island of New Zealand from Newmont Mining. This consistent asset growth has allowed OceanaGold to develop into a mid-tier gold producer producing in the order of 500-550,000 ounces per year – a level that the company hopes to maintain in the medium term.
Around 10 years ago, the company formed a vision to build a business in Australasia, Asia-Pacific (APAC) and the Americas. Thus far, OceanaGold’s president and CEO Mick Wilkes believes this strategy has been successfully executed.
“We are now an international company and want to cement our position by adding another couple of operations to our portfolio to make ourselves more relevant in the industry,” he says.
“We want to provide a more robust business, producing gold at relatively low costs and high margins and continue to provide a strong return on investor capital.
“But for us it’s not just acquiring or discovering the asset, it’s also about the systems and processes that we employ, the management structure and the culture of the company.”
OceanaGold runs a decentralised business with resources and accountability placed on the shoulders of general managers onsite across its four operations. In doing so Wilkes feels that the company has been able to conquer issues created by time zones and geographical distance.
“In our business you have to be prepared to go where the gold is, and that means having the ability to operate in different jurisdictions and time zones. That’s our business model and so far it’s been very successful.”
Sustainable development has been another key focus area for OceanaGold in recent years, with concerted efforts made to build the capability of the business around social performance and stakeholder relations.
Last year, the company appointed Sharon Flynn to the executive team to take charge of social performance and sustainability. Flynn has over 20 years of experience designing and implementing sustainability strategies and has worked for the likes of Rio Tinto and Conservation International.
“With her expertise in how to structure this part of the business, we have made some great strides in institutionalising social performance, which has proven to be very beneficial for us.”
In particular, the company has developed a range of social performance programmes in Philippines, where it mandatory for mining companies to undertake such activities in order to continue operating.
OceanaGold has partnered with the local government on the island of Luzon to support the needs of the local community and empower them through its six social investment pillars: Employment and training, education, health, business development, infrastructure and environmental management and conservation.
As a result, the company has built significant expertise within this area of business and been able to apply the art of social performance in Philippines to its other operations around the world, including New Zealand and the US.
2017 was a record-breaking year for OceanaGold, with the company achieving record gold production of 574,606 ounces across all four operations, along with record cash flow and net profit of US$172 million, which allowed the company to declare its second dividend of the year.
These achievements are made more remarkable by the fact that there were some commissioning hiccups at the Haile Gold Mine in the US.
“Despite this challenge we had record production and profitability. This demonstrates both the quality of our assets and the robustness of the business in having a diversified set of assets in different jurisdictions.
“The gold industry is hard enough and there are a lot of factors out of your control. To be successful and sustainably profitable, you’ve got to have multiple assets. That is well recognised these days and we demonstrated that in spades last year,” says Wilkes.
Increasing the reserves
Building on its strong performance last year, OceanaGold set a target to increase the reserves around all four of its operations, particularly in New Zealand and at Haile in the US, which should lead to higher production rates and longer mine lives across the portfolio.
“We’ve had a lot of success in New Zealand around the Waihi gold mine. The Martha project is going very well and we’ve logged terrific intercepts of gold intersections beneath the pit, which could extend the life at Waihi by 10 years from underground. The permits for that project are also going to plan.”
The other piece of good news coming out of Waihi is the WKP prospect just to the North, which is showing strong potential for the development of an underground mine operation. OceanaGold has a couple of drill rigs working at the prospect, which have already intersected significant high-grade gold mineralisation.
In South Carolina, the company aims to increase production at Haile, which is part of a three-year plan to boost the capacity of the plant through the installation of a new fine grinding system and a pebble crusher.
“The pebble crusher has been commissioned and is up and running and we expect to commission the fine grinding circuit in the first quarter of next year, which should lead to higher throughputs.
“We’ve also planned some additional projects on the horizon to improve the performance of the process plant and increase throughput and production in 2020.”
In parallel, OceanaGold has commenced the permitting process for the expanded open pit and underground mine at Haile and hopes to receive the permits by the end of 2019 or beginning of 2020.
Elsewhere, the firm has entered into two joint ventures with Mirasol Resources in Argentina to earn up to a 75% interest in two early stage exploration projects located in Santa Cruz Province.
These greenfields targets have provided some encouraging early results and are part of the company’s exploration strategy across several prolific gold provinces in North and South America.
“Geologically speaking, Santa Cruz is a significant gold province. There are some very good mines that operate there and there is very little impact on community and environment from those operations.
“The style of mineralisation is these low sulphidation epithermal type deposits which lend themselves to low capital costs, high margin, quick payback investments. This fits well with our strategy for entering a new country like Argentina.”
New Americas HQ
On a corporate level, OceanaGold recently decided to move its America’s headquarters from Vancouver to Denver as the company looks to firmly establish itself in the US market.
“Vancouver was very helpful because it put us into traffic in North America and as a result we made a number of acquisitions including the Haile Gold Mine. But we began looking for a hub in North America that would also provide an interlink to our business in Australasia and APAC.”
Denver soon emerged as the location of priority, with the Colorado city already home to major gold producers Newmont and Barrick Gold, and the biggest gold producing state in the US – Nevada – is in close proximity.
“Our Denver base can support our operations in South Carolina and hopefully future operations in North and South America. It’s part of a long-term strategy to build our business in the Americas”
OceanaGold has enjoyed a strong first half of 2018, generating around $90 million in profit and remaining on track to hits its revised production target of 500-550,000 ounces of gold.
“We are in good shape and I expect us to sustain this level of profitability for the medium term and into the long term if our exploration plans come to fruition. We have a vision and we will stick to the strategy and build a really robust business.”