OceanaGold PH [OGP 14.90, down 4.2%; 817% avgVol] [link] posted a Q3 net income of $3.6 million (~P210 million), up 620% from its Q3/23 net income of $0.5 million (~P29 million), and down 74% q/q from its Q2/24 net income of $14.2 million (~P827 million). Gold production was up 21% q/q, but still down 8% y/y. OGP attributed the quarter-on-quarter increase in production to “increased availability at the processing plant”, and the year-on-year decline to “a major rain event” and changes that the company made to the mining rate in Q2. From a sales perspective, total gold sales in Q3 were up 52% q/q, at an average gold price of $2,511/oz. Combined, this resulted in a 27% y/y increase in revenue to $102.1 million. In the “Guidance” section, however, OGP said that it has updated the amount of gold it expects to produce in FY24. The previous annual production range of 120,000 to 135,000 ounces of gold has been adjusted down to 104,000 to 108,000 ounces. The downward adjustment was made due to the “lower than expected mill performance in the second quarter”, and the “breccia stope redesign”.
MB bottom-line: It’s personally been frustrating to see these adjustments being made after the IPO. The pitch to investors was a relatively straightforward one of estimated production, estimated gold selling prices, and dividends of 90% of OGP’s quarterly free cash flow. There’s a lot of complexity (and therefore, risk) behind that narrative, and we are seeing that play out a bit here as OGP has had to adjust its mining plans to account for safety concerns and updated information on the quality/grade of the ore it can access. To its credit, OGP said that production would increase in Q3 after that wobble in Q2, and it did increase by 21%. But I’ve heard from some investors who are confused about the dividend, and in this regard, OGP is not doing its investors (or its investor relations team) any favors by not providing a clear free cash flow figure or performing the calculation for its investors. It performs the calculation for the portion owed to the government under its mining agreement, so I’d like to see this done going forward to help investors track and evaluate the actuals with their expectations. OGP is going to be one of our MB Investment Month participants, and I hope the company will address some of the concerns you asked about soon.
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