OceanaGold Corporation (OGC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the OceanaGold Corporation conference call. [Operator Instructions] Note that this call is also recorded today, April 8, 2020. And I would like to turn the call over to Sam Pazuki. Please go ahead.

Good evening. Good morning, and welcome to OceanaGold's corporate update. I am Sam Pazuki, the Vice President of Investor Relations for OceanaGold. Over the course of the past few weeks, we have provided several market updates on changes to our business, including our response to the COVID-19 pandemic. The purpose of this conference call is to engage with you to discuss these changes and our long-term strategy. This call is also an opportunity to introduce Michael Holmes, our recently appointed President and Chief Executive Officer. Michael was appointed to the Board of Directors on March 18 and this role on a permanent basis on April 6. Michael joined OceanaGold in 2012 as our Chief Operating Officer. Many of you have met Michael while he served in this capacity, including more recently in February at the BMO Metals & Mining Conference. Michael is a mining engineer with over 30 years of experience working in Australia, New Zealand, Asia and North and South America. He has broad operational experience in underground and open-pit precious metals and base metals. Prior to joining the company, he was a general Manager of Glencore's Alumbrera operation in Argentina. Prior to that, he was the General Manager of the Mount Isa copper operation in Australia, managing the large-scale underground mine and concentrator. In addition to Michael, we are also joined here today by the entire OceanaGold executive management team. So moving on to Slide #2, just a cautionary statement. 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. Please refer to the disclaimer on the forward-looking statements in our presentation. Please also note that we are providing the current status of our operations and our business. While we have maintained our formal production guidance, the current situation related to the COVID-19 virus is fluid, and any protraction of government orders could impact our status quo. Through our continuous disclosure obligations, we will provide market updates to any and all material changes to our business. It's now my pleasure and with great excitement to turn the presentation over to Michael Holmes, our new President and CEO.

Yes. Thank you, Sam, and hello, everyone. Turning to Slide #3. It is a pleasure to be here with you today, along with the OceanaGold executive management team to provide a corporate update. Today on the call and working remotely are: Scott McQueen, our Chief Financial Officer; Mark Cadzow, the Chief Development Officer; Cody Whipperman, our EVP, Corporate Development; Sharon Flynn, our EVP, External Affairs and Social Performance; Liang Tang, our EVP, General Counsel and Company Secretary; Craig Feebrey, the EVP Exploration; and Graham Almond, the EVP, People and Culture. Additionally, we have Sam Pazuki, who has kicked off this call; Jim Whittaker, who is the Executive General Manager at Haile; and Greg Scanlan, our Group Head of Health, Safety and Environment. These are certainly unprecedented times for all of us, and I hope each of you, your family and your friends are healthy and safe. OceanaGold is more than just one person at top. It is a team of highly skilled and experienced professionals. All of us on the call today have been running the business for the past several years. And I am now honored to lead the business. We are managing the business for the near-term risks, but we're also planning for the long term. We have a strong asset base and an exceptional team that is acutely focused on making long-term decisions and delivering consistent positive results and long-term value for shareholders. At OceanaGold, the health, safety and well-being of our workforce is paramount, which is why we have enforced very strict protocols related to COVID-19 at our operations and for our corporate staff during the global pandemic. Our operations have been impacted by COVID-19 and government decisions. Mainly in New Zealand, where we have temporally suspended the development of the Martha Underground Project at Waihi and scaled back operations at Macraes. In line with the New Zealand government orders and our obligations to the regulators, we have reduced the Macraes workforce, while retaining a skillful crew to maintain the operability of the process plant, carry out activities for health and safety and to safeguard the environment. Mark Cadzow will discuss the New Zealand operations in more detail shortly. At Haile, it's business as usual. And we remain fully operational with very strict protocols in place to manage the risks associated with the COVID virus. Jim Whittaker will discuss the Haile response in greater detail soon. Our near-term cash flow and liquidity is strong. We are well positioned post the sale of noncore equity interests, the successful Didipio doré export, advanced gold sales and a $50 million drawdown from our credit facility, bringing our total cash balance to approximately $180 million at the end of March. For the near term, we are reviewing multiple scenarios that could change our business as it relates to the COVID-19 virus. And we are developing plans for each of these scenarios. The plans include options for reduced spend and capital deployments that do not materially impact our future growth plans in New Zealand and at Haile. This approach, though new to include the COVID-19 pandemic scenarios, is standard practice for us. Our team takes a continuous improvement approach that ensures we operate our mines efficiently and safely. Scott McQueen will discuss our financial position in more detail later. Although our near-term focus is on managing the COVID-19 crisis, our medium- to long-term strategy remains unchanged. We will deliver consistent positive results in the near term while progressing key growth projects over the long term. However, depending on the duration of the current crisis, we may experience some form of impact to timing of certain strategic initiatives including the start of production at Martha Underground. The resumption of operations at Didipio is a top priority, and we continue to have encouraging tangible actions from the national government. Most recently, the Office of the President authorized the delivery of diesel fuel to the site, which we require to power backup generators in the event of power failure to maintain dewatering of the underground. Although we arranged for the logistics of the fuel delivery, the actual delivery fell under the mandate of the mines department to carry out the executive order. The delivery was exported by 60 national police officers who followed standard operating protocols to disperse the dozen anti-mining activists who had been blocking access to the mine. We will continue to engage with the national government on the future movements of materials in and out of the site. Overall, for the business, we will adapt the strategy as necessary and be practical on what we can do and achieve. We appreciate the support we've had received from our solid group of shareholders, and we are strongly committed to creating long-term value for them. We have a high-quality operations, a solid pipeline of growth opportunities and the right team in place to achieve this. I will now turn it over to Greg Scanlan, our Group Head of Health, Safety and Environment, to discuss our COVID-19 response.

Thank you, Michael, and hello, everyone. On Slide 4, we outlined at a high level how we've responded to COVID-19, the threats and the measures that we've developed and implemented over the past several weeks across the company to safeguard our employees and to support business continuity. The response measures fall into 3 key areas: our first area being to focus to minimize the likelihood of our employees being exposed to the virus. All international travel and nonessential travel was band several weeks ago. Those returning from trips followed -- following travel have been required to self-isolate for 14 days and to monitor the symptoms. Attendance at conferences and training sessions were immediately canceled and there's been restricted access to our operations and our offices. Employees who become ill or who are exposed to illness required to self-isolate, and they're supported in self-isolation and working from home. Social distancing measures have been implemented, including many of our office-based employees working from home. We conduct video conferencing and we have restrictions regarding access to common work areas. Personnel and workplace hygiene has been escalated with provision of additional cleaning services, hand wash and sanitation practices. Our second area of focus is to ensure that our workforce is well informed and can self-manage to reduce exposure risk to themselves and their families. So we've significantly increased our education and awareness of COVID-19 hygiene practices and the appropriate social distancing principles. We're in regular communications with our workforce from both the corporate and operational leadership levels and are providing close support to them during these challenging times. The third key area of focus is to support the development of more specific and stringent operational continuity plans that reflect the local reality in each jurisdiction. Specific actions at each operation include workplace health screening to restrict access, staggering the start times and meal breaks to enhance social distancing, the identification of critical tasks and employees that are required to maintain safe operations, vehicle and shared transport used and isolation rules, again to enhance social distancing. Heightened and detailed cleaning practices, a review of critical consumables and spare equipment requirements to ensure supply has been undertaken at each of the operations. The development of recovery plans to decontaminate and immediately isolate any workers exhibiting symptoms to minimize operational interruption and safeguard our work has also been a key area to achieve under the operational focus. To date, the company has not had any confirmed cases of COVID-19 among any of its employees or contractors. However, the situation is fluid and we will continue to monitor all our employees and contractors. As Michael mentioned, management of -- for the potential of COVID-19 requires fluid and adaptable approach that reflects the local reality. We're in regular communications with the regulatory agencies at each operational jurisdiction. And we're constantly reviewing industry best practice to assess opportunities to reduce our exposure to the virus. We encourage our stakeholders to visit our public website for additional updates on our business as it relates to the COVID-19 crisis. I'll now turn over to Jim Whittaker, our Executive General Manager of the Haile operations.

Thank you, Greg. Hello, everyone. I hope you're doing well and are safe. Please turn now to Slide 5. As Greg just mentioned, the situation around us is fluid. However, we have been managing the COVID-19 risk effectively. Several weeks ago, we acted swiftly in response to the virus and have implemented very strict protocols to safeguard our employees and contractors. As announced last week, Haile continues to operate at full capacity. In the first quarter, with enhanced health and safety protocols and more rain days than expected, we delivered on planned production, while costs were slightly higher. The second quarter is historically dryer in South Carolina and has been for us at Haile over the past few weeks. As such, we are very confident we will make up for lower productivity from the first quarter over the balance of the year. Our upgraded mining fleet is working very effectively. And over the past few weeks, we have achieved record mining rates ranging between 140,000 to 150,000 tonnes of material mine per day on dry days, and we achieved these rates with only 13 to 15 trucks in operation. As of last week, all 15 of the new Komatsu 730E haul trucks were operating and these trucks are supported by the fleet of 785 Caterpillars. The process plant continues to operate ahead of expectations. And over the past couple of months, we have been continually achieving record throughput days. We are also seeing year-on-year increasing recoveries at the same relative mine grade and we will continue to improve the operation of the fine grinding circuit. On the supply chain front, we have critical supplies in stock. To mitigate for any potential supply disruption, we are in the process of ordering additional critical supplies, consumables and spares. From my perspective, it is business as usual at Haile. We have the right protocols in place and I have an excellent team that continues to deliver on expectations. We are managing well during today's uncertainty and my focus is on ensuring we deliver consistent positive results through the balance of the year and continue to progress our growth opportunities at the site. I will now turn it over to Mark Cadzow, who will discuss the New Zealand operations.

Thank you, Jim. [Foreign Language] all. The New Zealand government acted very quickly in response to the COVID-19 virus. First, by banning all travel to and from the country and mandating self-isolating for all returning travelers for 14 days. And then a little over 2 weeks ago, they raised the COVID alert level to the highest level. They ordered all nonessential businesses to close and mandated citizens to shelter in place for at least 4 weeks. We fully support the government's decision and have been in continuous communication with the government -- with government officials throughout this process. At Waihi, we temporarily suspended development of the Martha Underground and have a skeleton crew of approximately 20 employees to conduct environmental health and safety activities during care and maintenance. This includes treating water through the water treatment plant, managing the tailing storage facility and safety checks in the underground. Exploration activities were also temporarily suspended 2 weeks ago. Processing stopped at Waihi in early March as planned. And we made all gold shipments we expected for the quarter. We also placed the plant in care and maintenance in early March. At Macraes, as previously announced, we have reduced our workforce by 85% with all mining operations temporary shutdown, while maintaining a skeleton crew to conduct environmental and health and safety activities and maintain our plant operability and operational readiness in preference to introducing the risk of a 4-week shutdown. This means we have limited site activity and production over the 4 weeks, while we keep the plant stable and safe. The skeleton crews at Waihi and Macraes are required to follow strict protocols, enforcing social distancing and regular cleaning of all equipment and facilities. We will continue to communicate with the regulator during this process, and we appreciate their support to our businesses to date. From the supply chain perspective, our New Zealand operations are well stocked and we have critical spares for 2 to 3 months. At this point in time, we have no supply chain issues and like Haile, we have ordered additional supplies in case there are future supply disruptions. I will now turn it over to Michael.

Thank you, Mark, Jim and Greg. In the Philippines, the national government has implemented an enhanced community quarantine until the middle of April. As a result, we have implemented a temporary lockdown of staff at the mine. No staff can enter or exit the mine unless their movement is essential. Consistent with what we have done at our New Zealand operations, the skeleton crew remains at the mine site and is ensuring continuity of environmental safeguards, emergency medical support and operational readiness. The cost while in lockdown is approximately $1.5 million a month. Currently, all levels of government are responding to the COVID-19 pandemic. Our focus remains on lifting of the restraints at the mine and the renewal of the FTAA. As I mentioned earlier, we experienced positive tangible actions from the national government in early March before the COVID-19 crisis. In early March, we were granted export permits to allow for the export of the doré that we produced but could not ship. That shipment was completed on the sixth of March. We continue to work with the support of the Department of Environment and Natural Resources, the Mines and Geosciences Bureau, the Department of Interior and Local Government and the Office of the President to dismantle the illegal barricade preventing access to the mine. We have recently had an agreement from the Governor of Nueva Vizcaya to provide province -- to transport fuel into the mine as directed by the Office of the President. And on Monday, in coordination with the national government, we successfully delivered 100,000 liters of fuel to the mine despite an illegal blockade by the anti-mining activists. We will continue to engage with government authorities on the permanent removal of the illegal blockades. We have also advised our Didipio workforce that we will commence a temporary layoff of nonessential employees from April 15 after the end of the current enhanced community quarantine period. We are forced to take this action given the continued unlawful restraints on our operation by the anti-mining activists. The FDA renewal remains with the Office of the President, and we understand the President was involved in discussions about the renewal with senior government officials at the end of February, which has led to the tangible positive actions from the government. This momentum, however, has somewhat slowed as many government -- national government officials are predominantly working in self-isolation and focused on the COVID-19 crisis. As we come out of the current COVID-19 crisis, the resumption of operations at Didipio is our top priority. The mine is the significant source of job, taxes and revenues that will be critical in contributing to the Philippines post the COVID-19 recovery. Despite the start of the layoff process and uncertainty around the timing end of the COVID-19 crisis, we do remain confident of a positive outcome. I will now turn it over to Scott to discuss the state of the balance sheet. Thank you, Scott.

Thank you, Michael, and hello, everyone. Turning to Slide 6, where we provide an update on our liquidity and debt position. We've been actively managing our cash and liquidity position for some time in response to the Didipio suspension. And frankly, from a strict liquidity standpoint, the impact of COVID-19 thus far has been limited. We continue to manage the balance sheet to ensure we can meet whatever short-term challenges arise, while pursuing our objectives, delivering long-term business initiatives which remain critical to growth. We've consistently maintained low levels of debt and that remains the case. We were facing an operating cash flow timing challenge in the first half given our second-half-weighted production profile, specifically as it relates to keeping our organic growth projects on track. As a result, we took proactive steps to address this timing issue and also strengthen our liquidity more generally, which have proven timely given the emergence of a COVID-19. These actions included amendments made to our debt facility late in 2019 when we eliminated the $50 million step down and extended the term of the facility by 12 months. We converted our equity position in GSV to cash, which netted us $23 million. After much work and with the support of regulators, we secured permits for the export of the gold doré, which had been on handed to Didipio since July 2019, generating about $11.5 million. As you're also aware, to address the operating cash flow timing issue, we executed a gold prepay, which brought forward $78.5 million from late in the second half. And that allowed us to better align our 2020 operating cash flow profile with our capital growth requirements to ensure we continue to deliver the growth projects on the optimal time line. Finally, with an added insurance measure, we chose to draw down the remaining $50 million against our revolving credit facility. While we are supported by a group of well-capitalized leading international banks, we couldn't ignore the potential risks the unprecedented global economic turmoil poses to credit markets. We continue to acknowledge the strong support of our long-standing bank group that includes BNP Paribas, Citibank, Commonwealth Bank of Australia, HSBC, Natixis and Scotiabank. We certainly recognize that COVID-19 crisis is fluid and poses unprecedented risks. And given that, we are proactively assessing options to reduce costs and defer capital further in the event the crisis worsens and the impacts on the company are more widespread or extended. This work is ongoing and covers all operations in corporate areas. As Jim mentioned, it's business as usual at Haile. Nevertheless, the team is still assessing options to reduce capital or defer spend. Focus areas include staging the development of the larger PAG cell and amending the timing of the TSF buildout. While we are expecting to incur holding cost of approximately $1.8 million related to the temporary suspension of development at Martha and Waihi regional exploration, the 4-week suspension also forces the deferral of approximately $5 million of planned development capital. As a result of the economic fallout of COVID-19, we are seeing some material reductions beginning to appear in some key cost areas including: diesel, given the material drop in oil prices; lower overall New Zealand costs with the New Zealand dollar falling approximately 10% in March and reduced corporate costs with the previously mentioned travel ban; reduced employee costs; and also the lower Australian dollar, given the majority of our corporate activities are centered here in Australia. We do have a strong cash position following the key liquidity actions taken and retained very strong relationships with our bank group. We will continue to ensure our balance sheet remains sound. We focus on operating effectively and efficiently through the current challenges and ensure we come out the other side with our growth projects on track and our assets in good order. I'll turn it back over to Michael to conclude the presentation.

Thank you, Scott. And turning to our final slide, Slide 7. Before we turn it over to the question-and-answer segment of this call, I will review the key aspects of our business. We have a strong management and senior leadership team in place. Together, we are managing the near term risks, focused on the health, safety and well-being of our workforce; regularly communicating with our workforce and the regulators; and preserving capital and reducing costs. While we carry out these near-term activities, we are also planning for the long-term and for when we move past the COVID-19 crisis. Our operations are well positioned to execute and deliver on their mine plans. We have a strong operational teams, and I am confident they will deliver to expectations. We're strongly committed to resuming operations in the Philippines and returning thousands of Filipinos back to our world-class operation and associated supporting businesses. Didipio is an important asset for the Philippines and to our business. And we will continue to work with our valued stakeholders in the country to restart the operations. We are focused on moving forward with our robust growth projects, including Martha Underground and delivering on the Waihi District and Golden Point underground studies, while resuming exploration activities in New Zealand. It is important to note that external releases of our studies does require community and stakeholder engagement. And if social distancing measures are extended, then we may be delayed in releasing the results of these studies. However, we do not expect delays to the studies to materially impact the timing of these projects at this time. The New Zealand government is currently focused on financial fiscal stimulus and we are working closely with them to see how our operations can help maximize these efforts. We will be looking to invest additional capital in growing our business in New Zealand, which means jobs and significant socioeconomic benefits for rural communities. We have high-quality operations, we have a strong growth pipeline and a good balance sheet and support of investors. We have a focused management team, the same team from over the past several years. We know what we need to do and we are doing it while managing the near-term COVID-19 risks. We are focused on delivering consistent positive results like we had for so many years and continuing on OceanaGold's strong history of leading a positive legacy every day. I will now turn it back to Sam to facilitate the Q&A session. Thank you.

Thank you, Michael. So that concludes the formal presentation segment of the presentation. We will now take some questions over the phone. To facilitate the Q&A session, I will turn it to the webcast moderator. Thank you, moderator.

[Operator Instructions] First question, which would be from Levi Spry at JPMorgan.

And congratulations on the appointment, Michael. Just a question on New Zealand. So maybe, Mike, just give us an update on exactly what's happening at Macraes right now and what your expectations are going forward? What negotiations you're having with the government right now to continue production there? And also, maybe Scott, could you just remind me about the hedge book, where that sits right now?

Okay. Thanks, Levi, for the questions. And well, Mark, do you want to answer this as the New Zealand Macraes working our process?

Yes. Okay. So at the moment, we're in a 4-week -- we're halfway through a 4-week lockdown here in New Zealand. We have had a skeleton crew on-site, keeping the autoclave count, and at a minimal level. So we found we've -- with the -- from an environmental risk point of view, it was best to actually get the autoclave going. And so we have limited crew there, just moving through stockpiles and keeping the autoclave going. We expect that at this stage, the government is very happy with the 4 weeks at the moment. And so whilst they haven't said that the -- will be lifted, we believe that everything is working as they expect at the moment. And so over the next 2 or 3 weeks, there'll be announcements about moving from level 4 potentially back to level 3.

Thanks, Mark. And Scott on the Haile.

Thanks, Michael. Levi, yes, we've got a couple of hedges in place. The first one being the hedge nationally over the Macraes operation that we put in place, I think it was mid last year. That was for about 119,000 ounces or around 60% of our expected production out of Macraes for the year. It is a zero-cost cut arrangement with the cap, I guess, is the key one at the moment at NZD 2,100. So it equates to about 9,500 ounces a month at floor of NZD 2,000 and a cap of NZD 2,100. That runs for the balance of 2020. There's nothing beyond that. And of course, the prepay arrangement that we got in place where we sold forward 48,000 ounces, no specific physical delivery location on that. And that physical delivery is between September and December this year. At -- that was put -- fell forward $1,635 and that equates to about 30% of our expected production over that period.

Next question will be from Mike Parkin at National Bank.

You mentioned that the carrying cost at Didipio should be running around $1.5 million a month. But then later in the call, you mentioned that there's some potential layoffs coming. Would that reduce that amount going forward? Or is that factoring in the layoffs?

Yes. Thanks -- thanks for the question, Mike. No that's factoring in the layoffs. So they'll be trending down over the 6-month period. That includes the layoffs.

Next question will be from Chris Thompson at PI Financial.

Congratulations, Michael. Hopefully, we will touch base soon. Just a couple of quick questions. We'll start off with Haile. You mentioned that the Q1 was -- cost was slightly higher. Obviously, the plant is performing well and the production throughput is increasing, which is all good news. So I'm just wondering what a good proxy for the cost for what you guys delivered in the first quarter of last year? Are we looking for an improvement over that?

Yes. Look, thank you, Chris, for that, and thank you for your wishes as well. With the -- with Haile, it's -- as we sort of mentioned at the beginning of the year, it is a second half weighted sort of process. And with the ramping up of the production, you'll see that being ramped up through the year as well. So the quarter costs for the first quarter were slightly impacted by some conditions -- some rain conditions, as Jim mentioned, but we will see those costs coming down. So the production will increase as we get the additional equipment into the dirt, and as Jim mentioned, we had the 13 trucks in the first quarter, up to the 15 trucks now by the end of the first quarter. So that with the dryer conditions as well as the full fleet in the dirt, we will see those costs trending down. But from the ounce position, it is second half weighted. So about 2/3 of the ounce production will be coming out in the second half of the year. So from an all-in sustaining cost point of view, you'll see that higher in the first half and then reduced in the second half.

Have you got just an update on the commissioning, I guess, with the regrind circuit there?

I think Jim would probably -- I mean it's taken a while. The last part to put in place with the pre-aeration thickener and which was being commissioned through quarter 1, which is now back up and running. So basically we've got all of the plant that's in order now and commissioned. We have an online sample that we still got to install, but basically, now we're sort of fully commissioned. And post quarter 1 and we'll be running the plants. As Jim said, it's running above expectations with the throughput, and we're just sort of fine-tuning to ensure that the grind size and the recoveries are where we want them.

Great. And then just a quick question on the approvals -- underground approvals, I guess, for Horseshoe there. Where do we stand with that for permitting?

Yes. So the SEIS process that we have, which includes, I suppose, the expanded Haile mining open-pit process plus the underground. We've been tracking quite well with that through the end of last year and through the first part of this year. Unfortunately, the process has been delayed due to the challenges of COVID-19, where the regulators are sort of fully focused on the activities in the state. So we've continued to maintain an active dialogue with the Army Corps of Engineers and the Department of Health and Environmental Control to continue that smooth path of the SEIS. We are still continuing to work with them. Part of the process, similar to New Zealand is the public consultation process, and we're looking at other opportunities on how we might manage that process. So the draft SEIS gets presented, and then there's a 45-day public consultation process following that. We're working with the regulators on how that may be approached with this current lockdown in the -- South Carolina. I suppose it is important to note, though, that through the process from the EIS to the draft SEIS, we've had 29 minor modifications that have been approved that have enabled us to continue moving the operations forward.

Okay. And just quickly moving on to Macraes quickly. How many weeks of stockpile do you have left, I guess, broken stocks and stockpiles to maintain the order clave at current levels?

We've got around the 2 million tonnes of stockpiles, varying in grade, to medium grade to very low grade. So we've got enough to continue going. I suppose what is important for us is to have some fresh material in through there. So we're moving broken stocks from pit to fresh material. And so that's sort of -- that will be going -- ongoing through this month.

All right. And then just finally, guys, I appreciate the time, by the way, in the conference call. But moving on to Waihi. Have you got an update to when we can expect the District Study?

Yes. Currently, the District Study for Waihi remains on track for completion in the second quarter. Again, as I suppose, mentioned with the Haile area and what Mark mentioned is that one step of the process is the public consultation. And if the state home order is extended, then they may be delayed in commencing the public consultation process, which may then delay the market release of this study.

Next question will be from Reg Spencer at Canaccord.

Congratulations, Mike, on your appointment. Just a follow-up question on Didipio and then those holding costs. If I recall correctly, the holding cost to maintain at a state of operational readiness were approximately $10 million a quarter, or $8 million to $10 million a quarter. That number -- that $1.5 million that you outlined in that presentation. Is there any change to the situation here? Or that would be -- that $1.5 million would be reflective of an assumed care and maintenance cost as opposed to maintaining that state of operational readiness?

Yes. Thanks for the congratulations, Reg, and thanks for the question. At the moment, the company has implemented temporary layoffs of its employees effective April 15, this year. And that's given the sort of current restraints on the operations by the local government unit and the COVID-19 crisis. So we've reduced at the moment, the workforce to the skeleton crew to care and maintenance activities and then everybody else is temporarily laid off for up to 6 months. If the FDA renewal sort of isn't received within the -- has been received within the 6 months, and we've sort of got that ability to rehire the workforce and get back into ramp up into operations. I suppose after that 6-month period, then we'll look at -- have some decisions about commencing the process of termination of employment. And that then goes back to a maintenance model.

Okay. Understood. So in the event that you do get the FDA. At this point in time, you are still able to restart in a relatively short period of time and according to those time lines that you guys previously announced that should this quarantine or lockdown lasts any longer than this, then you would be looking at that full restart out of a full care and maintenance phase. And I presume getting that diesel into site is obviously in part to manage that maintaining that state of operational readiness or it's a safety thing in the mine in terms of any extended lockdown that you might experience on-site?

Yes. It was -- Reg, it was mine. The diesel is mainly there to ensure that we have enough capacity should something happen to the national grid and we had to continue dewatering the underground. So that is maintaining that operational readiness in the event of a national grid outage for a period of time. So it's a critical part of basic plant and it's a critical asset for the national government, and hence, the reason -- the importance of the diesel on the site.

[Operator Instructions] And your next question will be from Nick Herbert at Crédit Suisse.

Congratulations, Michael, on the appointment. Just a couple of questions on the cost side from me as well. Didipio, pretty clear, but just want to be 100% certain beyond that $1.5 million you've mentioned. Is there any other committed spend beyond that at all? If we look out -- you got that 6-month time horizon, if it were to take 12 months, obviously, it's a different world in that case. But is there any other commitment beyond that $1.5 million? Or that's just what we can assume is an ongoing basis until further notice.

Yes. Thank you, Nick, and thank you for the wishes. Look, the -- and what we sort of discussed at the beginning of the year is that if we didn't go into care and maintenance, it's around about $3 million a quarter. And then there is a -- and if we go down that path and we do temporarily terminate our employment, then there is around about an $18 million redundancy cost.

Okay. And then just, Scott, you mentioned that I think the Martha Underground holding cost, you put a figure there, $1.8 million. Just to clarify, was that the holding cost over a -- over that, well, the current 4-week suspension period?

Is that for Scott or Nick you addressed that to?

Sorry, to Scott. Yes, that's right. Yes.

Thanks, Nick. Yes. That's the cost of going into the stand down, the New Zealand government forced stand down for a month, including effectively everybody on full wages. We are getting the government subsidy, which is very beneficial to us in that environment. But as I said also, we were planning to spend up to around $5 million during that month to continue the development of the underground and the drilling in the regional area, which has been slowed down.

And your next question will be from John Tumazos of John Tumazos Very Independent Research.

Congratulations once again, Michael. In terms of the New Zealand hedge, NZD 2,100, which I guess is about USD 1,260, do you think in the coming months, you're going to have to buy gold on the market to meet that hedge? Or can you roll it forward if you have any production disruption?

Yes. Thank you, John. At the moment, we're -- with New Zealand, it is a 4-week ordered by the New Zealand government. We have in place within price ensuring the safety of the plant and the operation and environmental care is to continue with that. We believe that we should be able to manage that gold hedge through this process.

Is that by processing stockpiles or that you have enough output in the other surrounding months? Or how will you manage it? Growing it forward? I don't know.

Well, depending on the New Zealand. Yes, so depending on the New Zealand government, I suppose, what we're seeing is that we've been able to sort of continue that operation and processing of lower grade stockpiles. We do have 3.6 million tonnes at around about 6.6 grams per tonne. It's important from an environmental perspective that the autoclave remains in operation.

Looking forward over the course of the next year, what are the good news points or milestones that your shareholder might anticipate or wish for? A couple of things might naturally appeal to short sellers, the hedge below market, $78.5 million gold loan, you drew down $50 million on the credit lines, an executive left, some mines [ writ-off ]. So if I'm -- I own your stock. I'm not a short seller. I'm a little bit of a contrary in biting my lip. But what are the things that might cause a short seller to cover that could evolve from your operations?

Yes. Well, thank you, John. I suppose when you look at it, our strategy over the past few years remains unchanged. Yes, we are managing the near-term risks and also working on the post-COVID-19 crisis recovery. So we have high-quality assets and we need to deliver on the commitments. And we have confidence, and I have complete confidence that we will. We have a pipeline of organic growth opportunities and we've advanced that, including the Martha Underground, the Waihi District Study which we've talked about for release in quarter 2 this year. We've got the Golden Point underground PFS that will be coming out in the second half of the year. And then we're ramping up the Haile open-pit as well as the Haile underground, which we're planning to commence next year. So those, I suppose, is still our major focus, our organic pipeline and focus. We do know and we have sort of worked with the national government in the Didipio, and we still sort of -- that still remains a priority for us is to get the FDA renewed and recommence the Didipio operations.

Is it reasonable to wish for a $100 million to $200 million reduction in liabilities, settling the gold loans, delivering out the New Zealand hedge, maybe paying back $50 million draw? Or do you think there's going to be development CapEx in each theater of operation, you're going to need the cash to run the business?

Yes, thanks for that, John. We have taken the actions with regards to the sale of the noncore equity, the sale of the Didipio gold doré, the drawdown of the $50 million and the presale. And that is to manage our business through this crisis as well as fund the growth projects that we have in place.

And at this time, we have no further questions. Please proceed.

Thank you, operator. I appreciate the questions on the line. So that concludes our conference call. A replay will be available on our website later today. On behalf of Michael and the rest of the executive management team, we thank you for joining us today. Should you have any follow-up questions, please don't hesitate to contact me directly. Bye for now.

Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.