OceanaGold Corp (OGC) Q3 2026 Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Oceana Gold Corporation Q3-2026 Earnings Call and Webcast. At this time, all lines are in 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, November 5th, 2026. I would now like to turn the conference over to Valerie Burns.

Good morning, and welcome to Oceana Gold's third 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 Forum. 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, Valerie, and good morning, everyone. Oceana Gold had a great third quarter. It was yet another solid quarter of safe and responsible gold production. We remained on track to meet four-year production guidance. We generated strong free cash flow. We returned substantial amounts of capital to shareholders. We progressed our growth options. And after all this, we still added a lot of cash to the balance sheet. It was a strong beat against consensus estimates on adjusted earnings per share and free cash flow, being two outcomes that really matter. Our gold and copper production in the quarter, at an all-in sustaining cost of $1,874 per ounce, keeps us on track to deliver on our full year production and unit cost guidance, with the fourth quarter expected to be the strongest quarter of the year. After investing in our growth projects, we generated $155 million of free cash flow. This takes us to $541 million of free cash flow for the nine-month year-to-date, which is almost identical to the amount we generated in the whole of 2025. In line with our capital allocation framework, we continue to provide strong returns to shareholders, with $79 million of buybacks and dividends in the quarter. And we strengthened our balance sheet, with cash up 11% to $729 million at the end of September, with zero debt. From a growth perspective, all of our organic growth projects had a great quarter. We made good progress at our flagship Whitey North project and at the Palomino Underground mine development at Hale, with both projects on track. We released some exceptional high-grade drill results at Ferrocaro Poma, which demonstrated what a spectacular all-body it is. We submitted our application for the Macrae's Phase 4 project and released some exploration results from Macrae's, which together underpin our view that Macrae's has the potential to operate into the 2040s. And, of course, we announced in the quarter the acquisition of Ausgold Limited, which we expect to complete by mid-December. This will add the Catanin Gold project to our existing growth profile with first ore expected in 2029. At the three quarter mark of the year, we have produced around 72% of the midpoint of our gold production guidance. We expect the fourth quarter to be the strongest of the year, and we expect to deliver around the midpoint of our full year production guidance. The strong fourth quarter that we expect will be driven primarily by hail, where mining has reached the higher grade, lower benches of the Leadbetter open pit. We also expect higher gold and copper production from the DPO in the fourth quarter, as underground mining rates continue to increase, and that has the effect of lifting the average grade of feed to the mill. McRae's is having a banner year, with production expected to be near the high end of its guidance for the year, and while his fourth quarter production is expected to be consistent with its third quarter. On AIAC, we said at the last quarterly call that we expected our oil and sustaining costs to progressively fall in the second half, which it did in the third quarter, being 13% lower than the June quarter. We expect a higher gold production in the fourth quarter to drive oil and sustaining costs even lower again, and we expect to finish the year towards the upper end of our 2026 guidance range. On capital, we expect to be approximately $45 million, or 7%, above our total capital investment guidance. This is a result of deliberate decisions to use our strong operating cash flow to increase investment in growth and exploration, from which we expect to generate considerable value. $35 million of this higher capital reflects accelerated investment in the Phase 4 project at Macrae's, more investment in the mining fleet at DiPio, and additional spend at the Waihing North project, where we accelerated some activities previously planned for 2027. An exceptional exploration success across all four sites also encouraged us to spend $10 million more than our initial exploration guidance amount. Overall, we're very pleased with our performance in the first nine months of the year and very pleased to be in exactly the right position to safely and responsibly deliver both the strong fourth quarter and our full year guidance. We have a very balanced approach to capital allocation. As you can see, year-to-date, we have evenly distributed our operating cash flow to sustaining the business, growing the business, returning capital to shareholders, and adding cash to the balance sheet. Our investment in sustaining capital projects is all about ensuring we can safely and predictably produce the most gold we can in a time of good gold prices. Our growth capital is mainly investment in the Waihe North project, the Palomino Underground Retail, and the McRae's Phase 4 project. We remain very focused on shareholder returns and have returned almost 50% of our year-to-date free cash flow through our expanded share buyback program and higher dividend. And after all that, we still added $252 million of cash to the balance sheet in this nine-month period, a 53% increase in cash since the start of the year. With that, I'll now turn the call over to Marius, who will discuss our financial results in more detail. Thank you, Gerrit, and good morning, everyone.

The third quarter delivered another strong set of financial results. We generated revenue in a quarter of $655 million, our second best quarterly revenue, at an average realized gold price of around $4,250 an ounce. We placed strong emphasis on our per-share metrics, which significantly increased across the board. Comparing the Q3 results against the same period last year, all financial metrics improved. Adjusted EBITDA was up 82%. Operating cash flow was up 43%. Adjusted earnings per share increased by 135% to $0.94. And we generated strong free cash flow of $155 million, resulting in a second-best quarterly free cash flow per share of 69 cents. Like others in the industry, we have experienced cost increases, and we continue to expect our full-year all-in sustaining costs to be towards the upper end of our 2026 guidance range, as we stated with our Q2 results. This reflects inflationary impacts on labour costs and operating consumables, the impacts of higher diesel prices where we were unhedged, continued investment in maintenance and reliability improvements, lower silver by-product credits due to a lower-than-forecast silver price, and lower sales volumes than expected at all. However, we maintain the strong adjusted EBITDA margin in a quarter of 58%. Demonstrating our ability to convert strong operational performance and disciplined cost management to the bottom line. And after our continued investment in organic growth and shareholder returns that Gerrit spoke about, we were still able to add $74 million in cash to the balance sheet. With no debt and our credit facility undrawn, we have total liquidity of almost $1 billion. These are solid financial results, and importantly, with an expected increase in production and unit costs expected to come down in the fourth quarter, we remain well-positioned to generate significant free cash flow for the remainder of the year. 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 good quarter. Producing around 55,000 ounces of gold at an all-in sustaining cost of just over $1,800 per ounce. Production was however lower than we originally expected in the quarter due to the implementation of a modified and a dearest mine plan which resulted in mining activities remaining focused on the lower-grade upper benches of the Leadbedder open pit. Importantly, under the revised plan, by the end of September, mining had advanced to the lower benches, positioning Hale to access higher-grade ore and deliver a significant step-up in production in the fourth quarter. With the fourth quarter off to a great start, with above 27,000 ounces already produced in October, Hale is on track for a very strong quarter four. In line with the expected increase in production, we anticipate all-in sustaining costs to decrease significantly in the fourth quarter. The Hale process plan continues to perform exceptionally well, with mill optimization initiatives and the hard work of the team continuing to deliver great performance. At the Palomino Underground, development of the decline continued to progress in the quarter, and construction of the first ventilation shaft has commenced. Development remains on track to achieve first O in early 2028. Our drilling programs accelerated in the quarter, and we are now drilling the Pisces target from both surface and underground as well as continuing to focus on Horseshoe Extensions and Leadbetter Lobe 3. We look forward to continuing to unlock exploration upside at this asset. With strong momentum in October, Hale is well positioned for a very strong quarter 4. McRace is having an exceptional year, producing around 37,000 ounces of gold in the quarter and 130,000 ounces year-to-date, achieving 90% to the midpoint of its full-year production guidance at the end of September. Production is expected to step down in the fourth quarter in line with the plan, with full-year production expected to be near the top end of the guidance and all-in sustaining cost, finishing the year within guidance. At Coronation North, which is a primary ore source for 2027, waste tripping continued to progress during the quarter in preparation for ore access later in the fourth quarter. In the quarter, we also submitted the McRace Phase IV project permit application, which seeks to extend the mine life at McRace from its current reserve life of 2032 to the late 2030s. This is an important step in securing the long-term future of McRace and includes permitting for open pit cutbacks, an extension to the Golden Point Underground, and an extension to the north of the current Innes Mills open pit, referred to as SPIM. These expansion opportunities are expected to contribute meaningful production at McRace up to the late 2030s. Beyond that, we released exploration results that support further mine life extension and see real opportunity to extend the mine life further into the 2040s through the continued exploration success in this highly mineralized area. The future of McRace is very exciting, and we look forward to sharing further updates on the mine as we unlock more value. Wahi also had a strong quarter, producing just under 19,000 ounces of gold and remaining on track to deliver its full-year production guidance. Quarterly all-in sustaining costs improved significantly from the second quarter as planned, and its full-year all-in sustaining cost is expected to be in line with the guidance. Wahee achieved a second consecutive quarter of record quarterly mill throughput since becoming an underground-only operation in 2016. A fantastic result for the team there. During the quarter, drilling accelerated at Ferry Caraponga following the increase to five active drill rigs. We released some exceptional exploration results from Farai Karepaunga in September, confirming the continuity and quality of the high-grade Serban Zone and representing outstanding conversion and growth potential. These drill results underpin an expected increase to mineral reserves for the year-end 2026 that will be presented in the updated Wahi District Technical Report in January 2027. This technical report will include an updated mine plan for the Wahee District and will incorporate a potential process plant expansion to 1.2 million tons per annum, which will support the extension of mining at the Maratha Underground in conjunction with the commencement of mining from Ferry Caraponga from 2032. This will add to our production growth profile and drive increased value for the Wahee District. While we are talking about the Wahee District, the development of our flagship Wahee North project continues to progress in line with plan. Since the commencement of the decline development in May, we have advanced just over 500 meters as we speak. Construction of the first ventilation shaft is underway, and we expect to begin development of the twin tunnel towards Ferrick Araponga in the first half of 2027. All surface construction, infrastructure, services, and underground tunneling activities are progressing to plan, with the project remaining on track for the first ore in 2032. We are excited to continue advancing this project as we get closer to the high-grade ferric Araponga ore body, which we believe will be a flagship asset for many years to come. A reminder that we only received the permits for this project in December 2025. Since then, we have made tremendous progress and look forward to showcasing all of it during our upcoming Alanist and Investor Tour to New Zealand in January. At DDPO, we produced nearly 23,000 ounces of gold and around 3,400 tons of copper in the third quarter, an improvement in gold and copper production from the prior quarter. With underground mining rates planned to continue increasing, we expect another step up in production in the fourth quarter. In line with the plan, all in sustaining costs improved significantly compared to the prior quarter, and we expect both production and cost at the TPO to be within their guidance ranges. We also invested in and completed several water resilience projects in the first nine months of the year ahead of the wet season, which was an important focus for the team. Exploration at the TPO continued in quarter three. With three drills operating underground, we have made significant progress drilling in panels 3 and 4, 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 DDPO, we completed the initial resource definition drill program and expect to share the results of all this drilling soon. I'll now turn the call back to Jared. Thank you, Bhuvanesh.

I'd like to recap on some of the major catalysts ahead for Oceana Gold. Next month, we'll be sharing the results of our drill program at DiPio. Also in December, we expect to complete the acquisition of OzGold, adding a high-quality development project in a premier mining jurisdiction to our portfolio. In January, 2027, we will release an updated technical report on the Waihe District, incorporating the results of our drilling and value optimisation work there over the past two years. We expect to have Macrae's Phase 4 permitted by mid-2027, which will underpin an updated technical report in early 2028. And we continue to progress the Palomino Underground project at Hale, where First Orr remains on track for 2028. Along the way, we expect to be regularly releasing the results from our expanded exploration drilling program, enabling low-risk mine life extension and real value creation for our shareholders. All of these make for exciting times here at Oceana Gold, and we really look forward to executing on these opportunities. In summary, this was yet another solid quarter, one that beat consensus expectations on adjusted EPS and free cash flow in what we expect to be a strong year for Oceana Gold. We remain focused on safe and responsible mining, delivering guidance, generating free cash flow, allocating capital in line with our balanced capital allocation framework, growing through exploration and low-risk organic growth projects, and providing strong returns to our shareholders. In closing, I want to recognise and thank the entire Oceana Gold team, whose dedication, hard work, and operating discipline contributed to yet another strong quarter. I'll now return the call to the operator and open up the line for any questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the 2. If you're using a speakerphone, please lift the handset first before pressing any keys. And we have our first question from Fahad Tariq with Jefferies.

Hi, thanks for taking my question. At Hale, if I do the math right on the fourth quarter, it looks like the ASIC would have to be around $900 an ounce. Can you maybe talk about if that sounds about right and also just the redesign of the south wall? Did that change the strip ratio or the ounces in the pit? Thanks.

Good morning, Pahad. Thanks for the question. I'll take the first one and I'll leave Bhuvanesh to answer the second. We actually don't guide to quarterly AIC, but I would say the following. You'll appreciate that ounces make a big difference to the oil in sustaining cost, and we're through a lot of the sustaining capex in the period as well. So the combination of a high amount of ounces, and you can see that for us to get inside the guidance range for hail, which we expect to, it's going to be like a record-like quarter. And as Bhuvnesh said, we're well on the way there with a 27.4,000 ounces October. That has a very powerful effect on lowering the all-in sustaining cost and so that'll be the primary driver. On the strip ratio, Bhuvanesh, I'll hand that one over to you.

Farhad, yes, there is a small amount of impact on a strip ratio, but very minimal is what I will probably say. I think the good thing about this new revised mine plan is that it enables those additional ounces at the back end of the Leadbetter Phase III phase in the mine plan. So it all gets absorbed overall. So none of those ounces are lost. It just basically gets pushed a bit. And then actually, as I said, very little to minimal impact on strip ratio.

Okay, great. And then if I switch gears to just capital return, just any comments on the pace of buybacks? I mean, the cash balance on the balance sheet is very, very high. If I'm doing the math right, even after the OzGold cash consideration, assuming the maximum cash consideration, the cash balance would still be around $600 million. Maybe just talk about how you're thinking about capital deployment and the pace of buybacks. Thanks.

Yeah, thanks, Farhad. We said at the start of the year, we had a target of $350 million of up to that in the year, which is double what we did last year, and we executed on that in full. When we set that target, we certainly didn't anticipate $137 million or so going out for cash for Ausgold. So that is different to what we started with. We take a view, and you can see with what happened last year, most of our buybacks did occur on a quarterly basis in the fourth quarter, as and when we see the combination of good gold prices. Operating performance and strong free cash flow generation. So if the performance is there, you can expect us to continue to execute on that buyback program to some degree. So having regard to the Ausgold acquisition. Yeah, it's ending the year with a lot of cash is not a target in and of itself, but it's a great position to be in, right? We have a number of growth projects coming, well, in progress with both. The Waihe North project and Palomino Underground, and then next year, or by the end of this year, we hope to have the containing gold growth project in our portfolio. So having a lot of cash just gives us the confidence of being able to execute on them should gold prices, you know, temporarily or otherwise, go to a lower level. So we like holding cash. It gives us the ability to execute growth projects. But again, we, as I said in my prepared remarks, very keen to focus on providing a balanced allocation of capital returns and putting shareholder returns at the front of the queue.

Thank you. Thank you.

We have our next question from Harrison Reynolds with RBC Capital Markets.

Great. Thank you. I wanted to ask on a follow-up on the buyback. Now, how does your internal view of the valuation fit into the cadence of the buybacks? And are you structuring the buyback based on allocating capital as it's received, as you're kind of alluding to, and maintaining a cash balance? Or how much of it can be opportunistic, looking at where shares are trading today and saying, this is potentially great value to be allocating excess capital to buybacks?

Thanks, Harrison. Well, it's always a great day to buy a share in Oceana Gold. But no, we don't try and play the market, right? We have, this year and last year, probably deployed about a bit over half to two thirds of the buyback program in the first three quarters of the year. And when that cash is certain to be in the bank or more certain than not to be in the bank, we go harder in the fourth quarter. In execution of it. Obviously, we have a look at our share price relative to our assessment of valuation, make sure that we're buying when we believe that it is a value accretive deployment of shareholder capital, which it has been, and we've had a great track record of buying back in that regard. And then in execution, we do look to be dynamic in its deployment. By that, I mean, we look to see where we are underperforming relative to our peers. And if that is the case, and we have that value lens, meaning that the door is open, that's when we put the capital to work. So that makes sure that we're being opportunistic in a tactical sense, but we're not being opportunistic on a, you know, trying to play the market sense.

Makes a lot of sense. Appreciate the detail there. And just as a second question, I mean, great to see the momentum as we're into the fourth quarter here and appreciate the detail on Hale. And just as you look across the assets between the current grades at Hale, McRae's reaching Coronation North and the progress at DiPio, how do you see the cadence of production shaking out in 2027, appreciating its early days still, but just an approximation?

Hey, Harrison, you're trying to squeeze out an early indication of guidance. I'm not going to fall for that trap. I mean, we'll put that out in February 2027. But, you know, with both Hale and McRae's, you do have open pits and they can go through campaigns. And I can think you can say that with Hale, that's probably a smoother campaign than McRae's. McRae's is a bit more undulating. But, you know, if I go across the other assets, you know, we're down deeper and with greater access to more levels at the DPO with more trucks moving more material from underground. So we get good value there. The underground mines at all sites are performing really, really well. And, you know, our milling performance, and I'll just call out hails again, is spectacular, as is Macrae's. I mean, these sites, and they're our two biggest engines, right? That's 60, 70% of our gold production is coming out of sites that are setting milling rate records and with no loss of recovery. So it's a really pleasing, you know, symphony of good mine grade presentation plus good milling rates plus good recovery. And, you know, hats off to the teams at all sites for achieving that. But no, so that's a long way of saying, you know, finishing a strong quarter is, you know, we believe setting ourselves up for, you know, a continuation of the same. Grade is king. It's how the grade presents. But, you know, we're doing, you know, good cutbacks to enable good access to grade in 27.

Got it. Yeah, sounds like good momentum into 2027 and appreciate the detail, even if it isn't early 2027 guidance. Thanks for taking my questions and congratulations again on the good quarter and ongoing progress.

Thanks, Harrison. Appreciate it.

There are no further phone questions at this time. I will turn the call over to Valerie Burns for any web questions.

Thanks, operator. We had one question come in from the webcast. You've been putting out some great exploration results at Fair Caraponga. When can we expect to see the next exploration update there? And with the now five drill rigs operating, is that part of the additional $10 million you're expecting on exploration for this year?

Yeah, look, I mean, I just refer back to those earlier results that we had. I think it was just before the Denver Gold Show or earlier than that. I mean, they were spectacular. I mean, what that did was confirm that that southern end of known mineralization was growing. We had some fabulous hits, you know, confirming continuity and its length. And it's growing closer to the southern end, at the southern end, which is from where we are approaching the ore body. So we will continue to drill. It is the primary and largest source of our exploration expenditures this year. It's $25 odd million. We are spending a little more there this year. It's not overwhelmingly the increase in $10 million. A lot of that $10 million also went to Macrae's as well, where we have had good results. As and when we get good drill results that tell a meaningful story, we release it. So I can't tell you when the next exploration results release for WKP is, but when we obviously get enough of them to make the basis of release, we will do so. But I expect you'll have one to two in the coming 12 months or so, given the rate of drilling, which is the essence of the question. When you've got more rigs on there, you're going to get more results and more basis for having to release one. But just point out that this amount of exploration we're spending this year is a record amount for the company, a big step up from last year. That's across all sites, which is why we've been able to put out exploration results at McRae's for the first time in eons, and we're about to do one for the DPO alone. So I think shareholders will see that the money has been incredibly well spent and the best goal to find is that near an existing operation. You've got the mill, you've got the infrastructure, you've got the people. It is the most secretive form of ounce addition that you can have and that's why we're really pleased to be in this position and have the land holdings necessary to give these kind of returns to our shareholders.

Great. Thanks, Jared. No further questions from the webcast. I'll turn it back to you for closing remarks.

Thank you, everyone. That does conclude the call. A replay will be available on our website later today. On behalf of the management team and everyone at Oceana Gold, I appreciate you joining us and wish you a very pleasant rest of the day. Bye for now.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation, and you may now disconnect.