OceanaGold Corp (OGC) Q2 2026 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Oceana Gold Corporation Q2 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, August 6, 2026. I would now like to turn the conference over to Valerie Burns. Please go ahead.

Good morning, everyone, and welcome to Oceana Gold's second quarter 2026 Operating and Financial Results webcast and conference call. I'm Valerie Burns, Director of Investor Relations. Joining me today are Jared Bond, President and Chief Executive Officer, Marius Van Niekerk, Chief Financial Officer, and Bhuvanesh Malhotra, Chief Operating Officer. The presentation that we will be referencing during the conference call is available through the webcast and on our website. As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the MD&A and Annual Information Form. All dollar amounts discussed in this conference call are in U.S. dollars. I will now turn the call over to Jared for opening remarks.

Thank you, Val, and good morning, everyone. We had a really good second quarter. We safely and responsibly delivered 7% more gold than we did in the first quarter. We continued to generate strong free cash flow. We made great progress with our organic growth projects. We returned meaningful amounts of capital to shareholders, and we still added cash to the balance sheet. Our gold production of around 139,000 ounces and copper production of 2,700 tonnes was in line with plan, keeping us on track to deliver on our full year guidance. Our margins remain strong. Even with the pullback from the record high gold prices of the first quarter, the second quarter delivered a record quarterly adjusted EBITDA margin of 61%. After investing in our growth projects, which include the Waihi North project and the Palomino Underground Mine, we generated $130 million of free cash flow, taking us to $385 million of free cash flow year-to-date. In line with our capital allocation framework, we continue to actively provide capital returns to shareholders, returning $78 million through dividends and buybacks in the quarter. And we strengthened the balance sheet with cash up 6% to $655 million, and we remain debt-free. We made great progress at our flagship Waihi North project, where the tunnel towards the high-grade ferrocura pongo ore body is well underway and we have advanced numerous other aspects of this exciting project finally we released more high-grade drill results from multiple targets at hail these demonstrate our ability to add value through exploration and highlight the significant upside potential that we have in our portfolio we're on track to deliver on our 2026 guidance at the halfway mark of the year we're around halfway towards the midpoint of full year guidance for both gold production and capital spend and we expect stronger copper production in the second half that will achieve our copper production guidance in terms of the shape of the rest of the year we expect the company's third quarter gold production to be similar to the second quarter and we expect fourth quarter gold production to be the highest of the year this increase is driven by expected stronger production and hail in the third quarter and then again in the fourth. This higher gold production in the second half, together with a lower rate of sustaining capital, is expected to drive our all-in sustaining costs lower in the third quarter and again in the fourth. Our all-in sustaining costs for the year is anticipated to near the upper end of our 2026 guidance range. This reflects labour cost inflation, more investment in maintenance and reliability improvements that have really high payback, the impacts of high diesel prices where we are unhedged and lower silver by-product credits due to a lower silver price than we expected. Total capital expenditure is expected to be in line with guidance. In the coming half, we expect an increase in growth capital for the Waihe North project and Palomino Underground and more waste-driven detail, partially offset by lower sustaining capex across the company. Overall, we're very pleased with our performance in the first half of 2026 and remain focused on safely and responsibly delivering on our full year guidance in the second half. Our capital allocation framework allocates our operating cash flow in a very balanced way. And you can see how in the first half of this year, we're almost evenly distributing it to sustaining the business, growing the business, returning capital and adding cash to the balance sheet. So by component, the $165 million of sustaining capital include investments in site infrastructure, improving the integrity of plants and equipment, mobile fleet improvements, as well as deferred stripping and capitalised mining. Our growth capital of $118 million was mainly investment in the Wahine North project and the Palomino Underground as hail. And the $25 million of exploration expenditures reflects that big step up in drilling across the portfolio where we think we can add enormous value to exploration. We remain very focused on shareholder returns and are pleased to have returned a total of $174 million of shareholders' money back to them in the first half of the year through our high dividend and share buyback program. a reminder that we have an approved program of up to 350 million dollars of buybacks for 2026 of which 134 million dollars has been bought back to date after all that we were still able to add 178 million dollars of cash to the balance sheet in the first half of the year which is a 37 percent increase in cash from the year end so in summary our capital allocation framework is working as intended. Funding the business, investing in growth, strengthening the balance sheet, and delivering attractive returns to shareholders. I'll now turn the call over to Maris to discuss our financial results in more detail.

Thank you, Gerard, and good morning, everyone. Q2 delivered another strong set of financial results. Notably, we achieved a record-adjusted EBITDA margin of 61%, driven by the lower cost of sales and a lower additional government share at Tadipio. Also reflecting our ability to translate strong operational performance and disciplined cost management to the bottom line. We place strong emphasis on our per-share metrics, which pleasingly reflects step-ups across the board. On screen, we compared the second quarter against the same period last year and all financial metrics improved. EBITDA was up 84%, operating cash flow was up 38%, and earnings per share increased by 102% to $0.99. And we generated free cash flow of $130 million, resulting in a free cash flow per share of $0.58. So after the investment in organic growth and shareholder returns that Jared spoke about, And after higher annual tax and government cash payments made this quarter, we were able to still add $35 million in cash to the balance sheet. We generated revenue in a quarter of $647 million at an average realized gold price of just over $4,400 an ounce, reflecting the timing of our gold sales. These are solid financial results, and importantly, with increasing production and unit costs expected to come down, we remain well-positioned to continue to generate significant free cash flow for the remainder of the year. As it relates to the Iran conflict, to date, there's been no disruption to our operations related to fuel order supply net worth. We hedge approximately 80% of our diesel requirements at both Hale and Macrae's. With those hedges in place, should oil prices of around $100 per barrel prevail for the remainder of 2026, then we continue to estimate an AISC impact of around $25 per ounce. We've extended 80% diesel hedges across all our operations from Q1 2027. I will now pass the call over to Bhuvanesh to discuss our operating performance.

Thank you, Marius, and good morning, everyone. At Hale, we had a strong quarter, producing 60,000 ounces of gold, which was in line with our guidance, driven by increased access to open-pit ore in Leadbedder 3 and higher-grade ore from the Horseshoe Underground. We expect this trend to continue in the second half of the year, with production to increase in the third quarter and then again in the fourth quarter, and all-in sustaining cost is expected to decrease each quarter. Our continued mill optimization initiatives and the hard work of the team resulted in the outstanding achievement in June of record monthly mill throughput, the highest since the mill was commissioned in 2017. Development of the decline towards Palomino Underground progressed in the quarter, remaining in line with the plan to achieve first ore in 2028. We continue to drill targets at Horseshoe, Ledbetter Underground, Pisces, and Clydesdale in the second half of the year. Hale is performing to plan and is well positioned to continue delivering for the remainder of the year. McRace had an exceptional first half of the year, producing 64% of the midpoint of its guidance already driven by higher grades mined and processed from the Innes Mills open pit. In line with plan, production is expected to step down in the second half of the year with full-year production and cost still expected to be within the guidance. At Coronation North, waste stripping continued to progress during the quarter in preparation for ore access later this year. We accelerated exploration programs across several areas at McCrae's during the quarter, with focus on resource conversion and expansion and we are expecting to submit the Increase Phase 4 Fast Track application for our ongoing mine life extension plans in the third quarter of this year. We are continuing to evaluate further extension opportunities that could potentially extend mine life into the 2040s given the leverage of this asset to the gold price and the inherent optionality at the site. We look forward to sharing more about these developments later this year. A real highlight in July, McRace produced its sixth million ounce of gold, a tremendous milestone that demonstrates how innovation, resilience, and disciplined operational execution can drive real value creation and is a great credit to the team there, past and present. At Wahee, we maintain consistent production with just under 17,000 ounces of gold produced in the second quarter, remaining on track to deliver its full-year production guidance. All-in sustaining cost in the quarter was impacted by the processing of lower-grade stockpile material. With access to higher-grade underground stopes now available, we expect all-in sustaining cost to decrease in the second half of the year. Pleasingly, Wahey achieved a record quarterly mill throughput since becoming an underground-only operation in 2016. A great result for the team there. I'd like to spend a moment on the Wahee North project, where we reached a significant milestone this quarter with the opening of the portal and the commencement of decline development towards the Fere Caraponga underground in May. Since then, the decline development has progressed in line with the plan, nearing 200 meters as we speak. Additionally, the service trench was completed in July, and the commissioning of the expanded water treatment plant is expected by the end of the third quarter. The next key milestone for the project will be the addition of the second jumbo underground to begin the twin tunnels towards the Ferry Carapunga O body. We expect growth capital to continue to increase in the second half of the year as development activities across the project ramps up. On exploration at Fereka Reponga, drilling is set to accelerate in the second half of the year. We have now added two new drill rigs, bringing the total number of active drill rigs to five. We look forward to increased drilling as it continues to grow and define this exciting ore body that will anchor what we believe will be a flagship asset for many years to come. At the DPO, we produced over 21,000 ounces of gold and around 2,700 tons of copper in the second quarter, an improvement in gold production from the prior quarter despite some mill downtime. Underground mining rates improved and excitingly during the quarter the decline development resumed as well. With underground mining rates planned to continue ramping up, we expect production to increase in the second half of the year. All-in sustaining cost is expected to decrease as a result of a higher gold and copper production and lower sustaining capital expenditures in the second half of the year. Exploration at DDPO is accelerating. We now have three drills operating underground and have an additional rig testing the extents of the DDPO mineralization at depth. At True Blue, an area of known mineralization 800 meters northeast of the DPO, we continue to drill, targeting the addition of new mineral resources by year end. I'll now turn the call back to Jared.

Thank you, Bhuvanesh. In summary, this was another strong quarter in what we expect to be another strong year for Oceana Gold. So to wrap it all up, we achieved record milk throughput rates at Hale and Wahey. Mine performance was very good at DiDipio, where we're also back into decline development. Macrae has delivered strongly and is creating attractive options for its future, whilst recently celebrating production of its 6 million pounds. Tremendous progress has been made at the Waihe North project and driving towards the new Palomino underground mine. And we had some stellar exploration results at Hale. We safely and responsibly delivered the plan, remaining on track to meet guidance while generating record adjusted EBITDA margins and strong free cash flow. We also strengthened the balance sheet and returned meaningful capital to shareholders. And we had some excellent drill results. I'm excited about continuing to share some of these drill results over the year as we deploy our record investment in exploration. In closing, I want to recognise the Oceana Gold team. This quarter's strong results reflects their hard work and operating discipline. and I'd like to extend my thanks to everyone throughout Oceana Gold for their efforts. I'll now return the call to the operator and open up the line to take any questions.

Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, you just simply press star, then the number one on your telephone keypad. And if you would like to withdraw a question, please press star, then the number two. Your first question comes from Avias Habib from Scotiabank. Please go ahead.

Thanks, operator. Hi, Jared and Oshina Gold team. Congrats on a good quarter. I've been bouncing between two conference calls, so I apologize if you've already touched on the questions I may ask. Starting off with hail, the accelerated stripping at the snake pit that we're doing at the beginning of the year. I think you may be continuing that right now as well. Can you please remind us why you pulled that stripping forward and should this translate into any sort of lower stripping costs going into 2027?

Yeah. Hi, Overse. Yeah, I don't think we pulled it forward so much. We just changed the sequence, but I'll hand that one over to Maris.

Yeah, we had that winter storm in Q1, so we took the opportunity to view the mine sequence with a focus on staying productive and efficient for that long-term plan. So in the first half, we did about 1.6 million tons of stripping, which we reported as growth, given consideration to its growth potential and value, and we intend to strip another 2 million tons in the second half. So probably another $8 million I've spent from a stripping perspective.

Got it. Sounds good. Thanks for the color on that. And then just staying at here, looks like the Palomino decline is progressing well. Are you planning to set up drill stations along the way to test the area between Horseshoe and Underground and Palomino? Is that in the plan? Any color on that would be appreciated.

Yeah, absolutely. That's the intention, Oves. We can get much better access, different angles, shorter drill lengths, increased density into Pisces from there, and also getting good angles back into the horseshoe underground. So that is absolutely the intention.

And has that been happening already, or are you going to be setting up the drill stations in kind of the second half?

We put some drill holes into Pisces from there. And again, as we get a greater length or closer to Palomino, we're going to have greater access points to get into Pisces from there as well. Yeah, so we're on the way.

Okay. And moving on to Wahi North, and a similar kind of question there as well. I mean, the decline in development seems to be progressing well. Is there a target you have in mind in terms of meters to reach by the end of the year And also, have you started to kind of drill steps, any sort of areas between Wahi and Farakaraparanga?

Well, we certainly have a target to drill every month, actually. So, yes, we're definitely on plan as it stands at the moment. I mean, we're still heading down and then we've got to get to the point where we start the twin decline. and it's about 200m into that which we expect will be in at around this time next year that we are going past some known mineralisation where we're certainly going to be having the rigs off to the side grilling looking for gold. So we're still heading down but absolutely along that 4.5km of of twin decline we're going to have a numerous uh exploration um cuttings off to the left and right to look looking for mineralization but the first time we expect to be able to do that having regard to where we see uh or have known mineralization is around this time next year so you have to hold your breath obeys sounds good uh and just uh maybe a question for bovinesh then in terms of the ground conditions experienced so far at you know after the portal and kind of the decline that all kind of according to plan looks all good on that end?

Yes sir it has been actually a very pleasing results from that aspect so far in 200 meters we had as we have anticipated close to 80 meters of pressure that we compensated through just in the last few weeks as well and it was exactly as per the plan as well. And remember, last year, we had drilled two long horizontal holes of almost 600 plus meters and 800 meters plus holes as well. So that has given us excellent information and understanding of the geotech conditions. So it's gone all to plan so far.

Okay, excellent. That's it for me, guys. Thanks for taking my questions.

Thank you, Agarish.

Your next question comes from Fahad Tariq from Jefferies. Please go ahead.

Hi, interesting question. I want to ask about why heat costs in the second half of the year. There was a comment that ASIC is expected to decline, but I think there was another comment in the MD&A in press release saying that production is expected to be flat or relatively consistent. So I just want to understand where the lower costs are coming from, whether it's a great uplift or something else.

Thanks, Fahad. It definitely is a great uplift, right? So we were more reliant on stockpiles in the quarter just gone. We're back into fresh ore. We make that comment in the MDN that we're back into good ore. And so when you, you know, all other things being equal, when you have higher grades, you cost a little low. Okay, great.

And then just taking a step back, the comment about labor cost inflation, can you just provide more detail on whether that's at a specific mine or region and just what you're seeing and, you know, where that's coming from? It sounds like it's not really diesel that's the big impact right now. Correct me if I'm wrong. It's more labor cost inflation. So I'm just trying to understand where that's coming from.

Well, we covered all the drivers of it, and diesel was a factor because we weren't hedged at all at Wahey or DiPio. And in the other sites, we were hedged 80%, which has been extraordinarily beneficial, but you still had an unhedged portion. So diesel cost was a factor, but labour inflation was the largest factor. And the number one place where we experienced that the most is at Hale because we don't have any currency protection there and sometimes labor rate inflation it's just it manifests itself in two forms it's what it takes for to pay employees or track new employees into the business but also as and when you rely on contractors and particularly maintenance contractors you know the the rate of inflation in their costs particularly if you rely more on them I mean, we did a lot more maintenance in the quarter. You tend to have a higher exposure to that mark into market of labor rates in the U.S.

Okay, great. That's it for me. Thank you. Thank you, Fahad. Thank you.

Your next question comes from Don DeMarco from National Bank. Please go ahead.

Oh, hi, Gerard and team. So I heard earlier in the call that at Hale, the throughput hit a record in June. I'm just wondering if you expect that to continue into July and Q3 in general, maybe setting up for a record in Q3, or are there some mitigating factors, maintenance, and so on?

Thanks, Don. I'll let Bhuvanesh make his promises on that one. Bhuvanesh?

I think we will continue to see those rates probably improve, and this is all because of the spend that we have actually made in improving the asset reliability of that plant, And it has been a long eight, nine months worth of process we have undertaken as well. We do have some shots coming up that will probably have to be factored as a part of the mill throughput, as you would imagine. But we are very confident of ensuring that these grades continue to basically be delivered through the second half of the year, too.

Thanks. That's all for me. Thank you for taking my question.

Thank you, Don.

Your next question comes from Harrison Reynolds from RBC Capital Markets. Please go ahead.

Hi. Good morning, Oceana team. Good to see another solid quarter. One question on Hale. Notice you approved the paste plant. I remember this being under study when we were on site a couple months ago. Could you walk us through the benefit of this cycle times, lower costs, and what you saw as a result of this study?

Sure. So, Harrison, there are two key aspects of the paste plant that helps us you know invest in that particular project as was approved by board the two the first aspect obviously is the cycle time of the stope sequencing as well we do basically see some of that accelerate as we start to see the pace coming through as well especially because the curing time is going to basically be 14 days so that's that means that the stope cycle can be moved faster and then the second bit which is probably the primary driver moving forward of all of this basically is it helps us to really slow down the rate of the tailings dam rise that we need to do as well. So there's a huge impact to the cost and the cycle times that we would like to improve, especially in the open pit, because those waste runs are quite extremely longer as well. And thirdly, I should say there's another factor to it, which is about ensuring that the tailings capacity can be elongated of as much as we can, as we continue to find Pisces and Clydesdale and all of those other things as well those can all be accommodated in the stage six race which is what we would like to achieve great yeah sounds like a sounds like a good project uh that's it for me thanks for taking my questions thanks harrison there are no further questions i'll turn the call back over to jawart thanks operator that concludes our webcast and conference call a replay will be available on our website later today on behalf of the management team and everyone

I appreciate you joining us and wish you a very pleasant rest of day. Bye for now.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.