OceanaGold Corporation (OGC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to today's conference call. [Operator Instructions] Note that this call is being recorded on Wednesday, July 16, 2020. And I would like to turn the conference over to Sam Pazuki. Please go ahead, Sam.

Thank you. Good evening, good morning, and welcome to OceanaGold's Waihi District study results webcast and conference call. I am Sam Pazuki, the Vice President of Investor Relations for OceanaGold. I'm joined today by Michael Holmes, President and CEO; Mark Cadzow, Chief Development Officer; Craig Feebrey, our EVP Exploration; Scott McQueen, Chief Financial Officer; and Sharon Flynn, EVP, External Affairs and Social Performance. The Waihi District study is a preliminary economic assessment, and the results we release today provide an estimate of the initial value we forecast for the Waihi District and a snapshot of its potential. Moving on to the cautionary statements. Before we proceed, 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. Bear in mind that the Waihi District study we are discussing today is a preliminary economic assessment. And according to the definition of the PEA, it is not intended to demonstrate viability, but rather study the potential viability for the Waihi District. The PEA includes inferred mineral resources that are considered too geologically speculative to have economic considerations applied to them in order to be categorized as mineral reserves. Further drilling, evaluation and studies are required to provide any assurance of an economic development case. The full technical report will be published on SEDAR and on our website within 45 days of this webcast. I refer you to the disclaimers on the forward-looking statements in our presentation. Moving on to Slide #3 in the agenda. For today's webcast, we will review key elements of the PEA and provide an opportunity for questions and answers following the conclusion of the presentation. So without further delay, I will now turn the presentation over to Michael Holmes. Michael?

Thank you, Sam. And good morning, good evening to all. It's a pleasure to be here with you today to go through the results of the Waihi District study, PEA. I am very pleased with the outcome that demonstrates the significant potential of district opportunities, which includes 2.5 million ounces of existing gold resources and a lot more exploration ahead of us. It's because of this potential that we're even more excited at how big this project could potentially be. Moving on to Slide 4. New Zealand has a long, rich history of mining dating back to the 1800s. We have been operating responsibly in New Zealand for the past 30 years and have created significant value for shareholders over this time and significant social, economic benefits for the host country. In fact, we're quite proud of our track record of successfully and responsibly exploring, consenting, developing, operating and rehabilitating mines in country. The Waihi District study highlights the opportunity to extend the mine life at Waihi for at least another 15 years and to create even more value for our stakeholders. The components of the Waihi District study are the Martha Underground, which is fully permitted and currently in development, with first production expected to be in the second quarter of 2021. Additionally, at Waihi, we had the Martha Open Pit with a small Phase 4 cutback already permitted, and we are now seeking to permit a fifth phase cutback. Near the processing plant is the proposal for a small open pit called Gladstone. And 10 kilometers to the north of a processing plant is the WKP deposit, which we are proposing as an underground mine with processing through the existing Waihi plant. Our base case for the Waihi District study PEA is based on a $1,500 per ounce long-term gold price. And under this scenario, the after-tax net present value discounted at 5% is USD 665 million. The corresponding after tax IRR is 51%, with the life of mine all-in sustaining cost of $627 per ounce and a mine life extending to 2036 and beyond. Another scenario that we have highlighted is based on the near spot gold pricing, where you can see even greater potential with an after-tax NPV of $915 million and an after-tax IRR of 75%. The results of the PEA demonstrate the initial potential of the Waihi District, and we look forward to realizing its value and demonstrating even more value through focused exploration and developing partnerships with our host communities for several years to come. Moving on to Slide 5 and the resources that have been used for the purpose of the PEA. As we've mentioned to the market previously, we were required to draw a line in the sand with the resources that we had on our books. We currently have a significant amount of drilling ahead of us, which, again, is the opportunity for creating even more value for the district. However, for the purposes of the PEA, we use the resources that we previously reported plus, we are happy to announce an increased resource at Martha Open Pit, which now has 470,000 ounces of gold on the books. The increase in resources that Martha Open Pit does include a reallocation of the Martha Underground resources of approximately 140,000 ounces and the previous resource of 80,000 ounces, which were attributed to the Martha Open Pit Phase 4. Thus, the net increase for Martha Open Pit is 250,000 ounces of gold. Additionally, we have increased the Gladstone resource from previously 101,000 ounces of gold to 142,000 ounces of gold. WKP resource remains unchanged from what we have previously reported. And the Martha Underground resource is now 740,000 ounces in the indicated category and 550,000 ounces in the inferred category. For the purpose of the PEA for the Martha Underground, only about 700,000 ounces of gold of its booked resources were used. Additional drilling and technical consideration is required to form mining shapes around the other 500,000 ounces or so of gold. The other opportunity with respect to the resources is the input assumptions these resources are reported using a New Zealand gold price of $2,083 per ounce, which compares to the current New Zealand gold price of approximately $2,750 per ounce. So that could result in a potential upgrade of the resources. However, we will provide an updated resource and reserve statement in the first quarter of next year. Turning on to Slide 6. We expect the Waihi District to initially mine 2.5 million ounces of gold over the 15 years of mine life. The production rate does vary as we bring additional sources of ore feed into production. The first cab off the rank is the Martha Underground, which we expect will start producing in the second quarter of next year with 35,000 to 45,000 ounces of gold production. Martha Underground will ramp up to between 90,000 ounces and 100,000 ounces a year, and we expect to keep it through -- we expect to keep it there through additional exploration success. Also noting the use of only half of its current resources for the purpose of the study and the exploration target we previously discussed, which Craig will walk through shortly. We then expect mining at Gladstone in 2024 before we start feeding high grade WKP ore in 2026, which starts to drive production significantly higher. WKP is expected to ramp up to produce between 190,000 and 230,000 ounces of gold annually. And through external -- exploration success, we expect to maintain these production levels for a long duration and giving us even more flexibility of mill feed or optionality for an additional mill expansion. We expect mining for Martha Open Pit in 2027, with its ore feed possibly being either stockpiled in favor of higher-grade ore from Martha Underground or representing an opportunity for further expansion of the mill, as I've just noted. The high-grade nature of the district will afford us the opportunity to continue to optimize and evaluate the project development time line and mining approaches. I will now turn the presentation over to Mark Cadzow, the Chief Development Officer, to take you through the specific results of the study and discuss the optionality available to us. Thank you.

Thank you, Michael. [Foreign Language] everyone. It's a pleasure to be here to present the Waihi District study results, which are quite compelling. I have been with OceanaGold since 1991. And although we have achieved a lot over the past 30 years, I'm most excited about the opportunity before us in the Waihi district, particularly WKP. Moving on to Slide #8. Michael mentioned the basis of the material input into the project, which initially is expected to culminate in nearly 2.5 million ounces of gold mined as the initial 15-year mine life. Martha Underground represents the initial feed source for the plant with a ramp-up of mining over a few years as we bring on additional studies. Craig's team will look after increasing the resource base at Martha Underground to further extend its life beyond the current 2028. The near-term opportunity is further drilling in the areas around the Martha vein in the underground to allow us to wrap mining shapes around the resource we currently have on the books. We expect to achieve a mining rate of approximately 750,000 tonnes per annum at the Martha Underground. The next source of mine feed -- sorry, the next source of mill feed comes from a small open pit at Gladstone near the existing processing plant. We are expecting 2 to 3 years of mill feed from Gladstone initially, until stockpiling mill feed in favor of higher-grade feed from WKP starting in 2026. WKP represents the highest-grade feed source of the Waihi District, which is -- with approximately 30,000 meters to 35,000 meters of drilling to date, we have a lot more to do there to further define and expand the resource. To date, we have only really tested the Eastern Graben vein, which is open in multiple directions and at depth. And we have yet to truly test the Western and T-stream veins, which has less than 8,000 meters of historic drilling. We have made conservative assumptions for Waihi with respect to dilution, and this could be an opportunity to increase feed grade. The mining rate assumed for WKP are initially peaked to 800,000 tonnes per annum. Finally, Phase 5 of Martha Open Pit provides additional mill feed beginning in 2027. This is where the most optionality currently resides in the plan. We could stockpile Martha Open Pit feed for future processing through exploration success at high-grade mill feed sources, mainly Martha Open -- Martha Underground and WKP. We could consider an additional low capital mill expansion. The Martha Open Pit is a compelling project on its own. Now moving to Slide 9. The Martha Underground is progressing well even despite the 5-week hiatus in April due to the COVID-19 restrictions that were put in place by the New Zealand government. We have compelling -- we had compelling -- sorry, we have completed several critical aspects of the project, including the completion of the ventilation raise bore between the 800 and 920-RL drives. The dewatering holes to approximately 620-RL, the current depth of the mine; renewal of the development fleet with 4 new or refurbished jumbos; and commissioning of our new smart center as we move to a digital platform for our upgraded mine operating system. The development rates are expected to ramp up as the year progresses to our peak by the end of this year. From the image at the top left, you can see our development plans at the Martha Underground with the areas we expect to develop this year and next year and over the life of the mine. There are additional mineralized zones that we will be drill testing over the next several years, including at depth, which may necessitate the development of a third production drive below the 800 drive. As Michael has mentioned already, for the purposes of this study, we have used only 700,000 ounces of the 1.3 million ounce resource. We need additional resource and geotechnical drilling in the Martha vein areas where we have considerable amount of old workings. We have confidence a good portion of this resource will make it into the mine plan. However, we weren't able to include these areas in this study. I will turn it over to Craig to take you through the exploration opportunities at Martha Underground.

Thanks, Mark, and hello, everyone. Although exploration and mining activities have been going on for well over a century in the Waihi District, there remains significant opportunity for discovery as we have demonstrated more recently at Martha, Gladstone and WKP, adding over 3 million ounces of resources since we acquired Waihi in late 2015. With approximately 9 million ounces mined at Martha historically, this is an exceptional deposit that just keeps giving. On Slide 10, the left figure is an oblique view of the Martha area, looking to the West across the Martha Open Pit. The Martha Underground resource in gold, the exploration target in purple and the current supporting development completed to date in green. The 4 main veins that contribute the bulk of the resource ounces are labeled Martha, Empire, Royal and Edward. And for scale, the Martha Open Pit is around 1 kilometer in length at its longest point. While the vertical distance from the pit rim to the bottom of the area, labeled Royal, is approximately 600 meters. I'd like you to keep this in mind when we're talking about WKP later on. We have delivered 740,000 ounces in the measured and indicated category and 550,000 ounces in the inferred category since drilling commenced in August 2017 and shown on the figure on the right. This has been an all-in cost of approximately $21 per ounce discovered. As mentioned, we also recognized a large exploration target of approximately 6 million to 8 million tonnes, grading 4 to 6 grams per tonne gold located in and around the currently defined resources that will be the focus of drilling in 2020 and '21. Again, that's the purple area around the resource in the figure on the left. Please refer to our footnote on Slide 10 and cautionary statement with respect to the exploration target. So looking forward, we have a sound resource base to support a future mine plan at Martha Underground. Our current focus is on infill drilling and conversion to support model update and deliver reserves in line with our plan to commence production in Q2 2021. I I'll now turn back to Mark to take you through the WKP physicals, and then I'll talk about the exploration progress we're making at WKP.

Thanks, Craig. And exciting, exciting indeed, that now to potentially the most exciting gold deposit discovery in New Zealand in decades. On Slide 11, you can see the initial physicals for WKP, which is based on the 1.1 million ounces of reported resource since -- seen in the first table. As Michael mentioned, this high-grade resource is based only on 35,000 meters of drilling, and nearly all of it is in -- is on the Eastern Graben vein, which is open along strike and at depth. WKP will be an underground operation with limited surface expression, given the deposit sits below Department of Conservation land, which, to us, is nothing new. Our plan at WKP is to tunnel under DOC land from a portal on private land. We have multiple options on where we would best place -- where this would be best placed and where to situate the portal that we would -- we have -- that we will further explore. Our expectation is to truck mill feed from the portal to the Waihi processing plant. The only service expression will be from -- will be for ventilation. We are also investigating the use of all-electric mining fleet for WKP, which will reduce ventilation needs and reduce our carbon footprint. Like we have in the Philippines, we would like to install a state-of-the-art underground mining operation, putting New Zealand on the mining technology advancement map. As someone who has been operating in New Zealand for the last 30 years and who has seen several, dozen projects successfully transition through the life cycle, I'm very proud to point out that we have a strong track record of environmental stewardship in New Zealand, notably with our Open Pit Reefton mine located on Department of Conservation land on the South Island of New Zealand. Reefton commenced operation in 2007, produced over 600,000 ounces of gold during its life and is successfully transitioning to full closure and reclamation. We're proud of the work we've completed to date there and the contributions the operation made to the local economy. I'll turn back to Craig to discuss WKP efforts -- exploration efforts.

Thanks, Mark. And turning to Slide 12, and our Wharekirauponga project that's the Maori name for the area. We're very excited about the project, both in terms of the results delivered today and what may be ahead of us in terms of its ultimate size. As demonstrated by Waihi, we're in a geological belt that can deliver world-class deposits for significant size and grade. As shown in the figure on the left, we've identified 3 veins in red, the East Graben, T-streams and Western veins, all of which have significant width and grade. In addition, as shown in the cross-section on the bottom right, there are several hanging and footwall veins on the East Graben structure, along with a significant footwall splay. Of the 3 main veins, we've tested a kilometer of strike on the East Graben vein, as shown in the top right figure with intercepts colored as gram meters. What's getting us excited is the continuity in geology and mineralization and that the East Graben vein is shaping up to be a similar scale to the main veins at Waihi. The big question is to what depth does the vein mineralization continue? And this is something we'll explore going forward, along with gaining a better understanding of the strike extent of all 3 main veins now that we have access to drill platforms 6 and 7 shown on the figure on the bottom left. As Mark mentioned, the East Graben vein has been the focus of exploration, along with the footwall splay. As a result, although the current resource is -- does include some ounces on the T-stream vein, the bulk of the resources grown on the East Graben vein and splay. This year, with draft conditions over the summer, followed by COVID-19 restrictions, we achieved very little drilling at WKP. We are, however, drilling again and expect to complete approximately 5,000 meters by year-end on the East Graben vein, including both extensional and infill drill holes. As you can see, we have another excellent opportunity here to invest in organic growth and grow the resource base at WKP and potentially further extend the mine life at Waihi. To date, we've added ounces at an all-in cost of approximately $14 per ounce, similar to the team's performance to date at Martha. I'll now turn it back over to Mark.

Thanks, Craig. You can see on Slide 13, a bird's eye view of the surface projects relating to the district. Martha Open Pit is located next to the town of Waihi, whose town slogan is the heart of gold mining in New Zealand. The processing plant and mining infrastructure are outside of the town. Gladstone is the next -- is next to the processing plant, while the Tailings Storage Facility is near the processing plant as well. WKP, as I've noted earlier, is 10 kilometers north. On Slide 14, the Gladstone pit is the second mill feed source for the process plant. We have increased the resource at Gladstone to 160,000 ounces of gold, of which, 140,000 ounces are in the indicated category. It's a small deposit and will represent mill feed for the first couple of years before we stockpile additional mill feed for later processing. We are looking to use the Gladstone waste mined for backfill for the underground stopes and TSF construction. Moving to Slide 15. The Martha Open Pit proposal reflects the fifth cutback of the open pit since inception of the operation in 1988. For us, the Martha Open Pit can be looked at as a back-end opportunity, giving way to high-grade mill feed from Martha Underground and WKP or potentially justifying an additional low capital expansion of the processing plant The open pit resource has been increased and is now 260,000 ounces of gold in the indicated category and 290,000 ounces of gold in the inferred category. To enable the cutback required, which I will also point out is much smaller than what we initially believed it to be, we will need to relocate some site infrastructure, including the Waihi administration office, which is basically an opportunity to decrease our G&A costs and includes the road alignment and relocation of the old pump house, which has been moved twice before. The Phase 4 cutback which is -- which was permitted last year, will now be absorbed into the Phase 5 cutback. The strip ratio is a modest 4:1, while grades of approximately 2 grams per tonne are relatively high for an open pit operation. Thus, the Martha Open Pit represents a high value opportunity on its own. As with Gladstone pit, the waste rock will be utilized as backfill in the Martha and Waihi Undergrounds as well as the Tailings Storage Facility embankments. Moving on to Slide 16 and the processing plant overview. The sources of mill feed, which have -- which we have discussed will be processed through the existing process plant. We have investigated multiple options to upgrade the processing plant and have optimized it given we had 4 distinct sources of mill feed. We looked at what delivered the most optimal value taking into account -- taking into consideration the infrastructure we currently have at Waihi, the spare plant at Reefton and rates of mining. The existing process plant is rated for a throughput of 1 million to 1.3 million tonnes per annum, depending on the hardness of the ore. Upgrading the mill at Waihi and supplementing with equipment from Reefton, we landed on an optimal and steady throughput rate of 1.6 million tonnes per annum to support the multiple sources of mind feed -- of mill feed. Our test work has shown strong recoveries and through further refinement, we could possibly do better than that. Moving to Slide 17 and the processing physicals. First, we look at the processing physicals and the steady ramp-up in throughput, which under the current plan peaks in 2026, in line with timing of the high-grade WKP feed. In that year, you'll see we start to stockpile feed for future processing. In 2027, we begin stockpiling Gladstone mill feed and we start feeding Martha Open Pit feed, but also stockpiling a considerable amount of mill feed for processing in later years. However, as I mentioned before, exploration success at Martha Underground and WKP has the potential to further push out open pit feed or we could consider another expansion of the plant. We do show great variability as we ramp up mining at the various sources of mill feed, mainly WKP. Head grade is over 4 grams per tonne with Martha Underground and lowered when blended with Gladstone. However, we see a significant increase in head grade with WKP mill feed starting in 2026. Moving to Slide 18. As mentioned, the existing plant has an average annual throughput of 1 million to 1.3 million tonnes, and we expect to invest approximately $36 million to upgrade the crushing, milling and carbon in pulp circuits to achieve the increased throughputs. Over the life of mine, this upgrade allows us to progressively move to 1.6 million tonnes per annum by 2024 at the targeted grind of 53 microns. Given our familiarity with the style of deposit and metallurgical test work to date, we're confident in the life of mine recoveries of around 90%. We did review the option of flotation and ultrafine grinding, but at this stage, it doesn't appear necessary. Over the next 2 years, we expect to install the Reefton dual crusher and SAG mill at a capital cost of $17 million. For the second stage of the mill expansion, we'll install a new ball mill, convert the existing SAG mill to a ball mill, install a new pre-leach thickener and install a new leach tank, all for a capital investment of approximately $19 million. We do not expect any lengthy production disruptions through this work and tie-ins will be undertaken -- will take place during planned maintenance shutdowns. It's also important to note that we looked at upsizing the process plant beyond 1.6 million tonnes per annum and believe 2.3 million tonnes per annum in later years is achievable on the existing footprint and would allow us to handle additional mill feed from the district as a future option. Moving to Slide 19. We currently have 2 Tailings Storage Facilities, both upstream construction. We have spare capacity at both and have an opportunity to lift both facilities that provide us with an additional 10 million tonnes of capacity. Further to that, a new TSF mix to the existing facilities has the capacity to take in excess of 20 million tonnes of tailings, substantially more than that is required for our current life of mine. Moving on to Slide 20. We will now go through the project economics, including the estimated operating costs and capital investment. Moving to Slide 21. The Waihi District represents production growth at first quartile all-in sustaining cash costs of $627 per ounce and life of mine cash costs of $557 per ounce. These costs are based on mining costs that are similar to our historical mining costs, but also take into account -- we will be going owner mining rather than contract mining as was the previous -- as was the case previously with Newmont in the open pit. Processing costs are expected to be just below $20 per tonne processed. As you can see by the chart at the bottom, we will see a gradual decrease in the all-in sustaining cash cost -- in the cash cost, as Martha Underground ramps up and especially when we start feeding high-grade WKP mill feed starting in 2026 and see production levels increased significantly. As we've mentioned already, although further exploration success -- sorry, as we've mentioned already, through further exploration success at both Martha Underground and WKP, we would look to extend the mine lives at both projects, which presumably will keep -- would keep production levels elevated and unit costs in the first quartile of the cost curve. This is where we see the most opportunity to add value. Shifting gears and moving to capital investment on Slide 22. The life of mine growth capital investment is projected to be $447 million, spread over 8 years, beginning with investment at the Martha Underground this year. Sustaining capital over the life of mine is $105 million and site rehabilitation and closure costs are estimated at approximately $50 million. The largest component of the capital cost is associated with WKP and the Martha Open Pit Phase 5 cutback. With WKP, the bulk of the growth capital is associated with developing the decline to access the deposit and associated surface infrastructure on private land. There are opportunities to reduce growth capital, which we are currently contemplating. And we are looking at some predevelopment of WKP, including an exploration drive. The timing of spend may vary as well, mainly from the timing of when we get WKP into production and further exploration success at Martha Underground and WKP. Moving to Slide 23. Here is another look at the capital investment profile by project. I won't spend much time on this slide and turn it over to the next Slide #24. Here, we provide the time line and capital investment related to each of the projects within the Waihi District. Note, much of the capital is spend -- capital spend is spread over approximately 8 years. In general, I will share with you that our mine plans have been built from first principles and to a high level of detail for our PEA mining inventories, they reflect. That said, some of our biggest ticket items, including initial underground mine development at Martha Underground and WKP, infrastructure related to accessing WKP underground from private land and construction of TSFs and waste rock stacks all contain PEA-level contingencies. Growth investment at Martha Underground shows a significant curtailment over the next year -- next year. However, we do expect to increase the mine plan and extend it through further exploration success, which will require additional capital, albeit very modest investment levels. WKP shows a drop-off in 2026 as it comes into production with further investment expected beyond that through exploration success. Moving to Slide 25 and how the moving parts of this slide culminate into initial value for shareholders. We assumed a base case scenario with a long-term gold price of $1,500 per ounce and a discount rate of 5% to calculate an after-tax NPV of $665 million and an after-tax IRR of over 50%. This is a robust project. The culmination of -- the cumulative undiscounted free cash flow has been calculated at over $1 billion while the average annual free cash flow is approximately $65 million from 2020 to 2036. The highest year for free cash flow is currently 2030 -- at $226 million. However, we calculated free cash flow generated over free -- we calculated free cash flow generation over $100 million a year from 2027 (sic) [ 2026 ] to 2031. As we've pointed out several times already, with further exploration success at Martha Underground and WKP, we could possibly see these strong cash flows extend beyond the time lines depicted here. However, this is dependent on exploration success. Moving to Slide 26. There are some sensitivities we've evaluated. The biggest drivers of value are gold price and exchange rate as the project is levered to both. Our base case, again, $1,500 gold price with an exchange rate of NZD 1 to USD 0.67. We can see that with an increase in gold price, particularly to today's levels, the value of the Waihi District opportunity significantly increases as it does with the weakening New Zealand dollar. Changes to capital investment do not move the value too much, demonstrating the robustness of the deposits. Slide 27. Now we can move -- now we will move to the stakeholder section and more specifically on the consenting or permitting process and their social -- socioeconomic benefits to the Waihi District is -- the Waihi District is expecting to deliver to New Zealand. On Slide 28, you can see the high level process for consenting projects such as these. The consenting process is nothing new to OceanaGold as we have successfully consented dozens of projects over the past 30 years. We have demonstrated responsible mining on both the North and South Islands of New Zealand and have delivered on our commitments, and we are proud of our reputation and track record as a corporate steward in one of the greenest countries in the world. We have never taken shortcuts, and there are none to take. We work collaboratively with our stakeholders through the entire life cycle of our operations, and this is demonstrated by the site reclamation and closure work ongoing at Reefton that I spoke of earlier. As an integral step in the technical and economic studies, we evaluate the social impacts through assessments and workshops to arrive at a balanced project outcome. Engagement is critical to our success and receipt of permits. The concerns raised by our stakeholders are seriously considered and factored into that decision making. We expect to be here for decades and worked very hard to earn the social license needed to be successful. After the initial public consultations, we proceed to finalizing the permit application, including lodging of the environmental assessment with the Hauraki and Waikato Regional Councils. From there, we have a public notification period where interested parties can submit letters, either in support of the consenting application or in objection to. Over the course of 4 -- of the 4 months, the regulator considers all the feedback and the company engages with stakeholders to further address concerns at which point any opposition letters can be retracted. The council then submits a recommendation report over the course of subsequent months upon which there is a hearing and a decision. Once the decision is made, there is an appeal period where anyone who has been involved in the process, for example, have submitted a letter in support or opposition, can appeal the decision. From there, any appeal can involve engagement between the company and the appealing party. If there is no resolution in this way, then the matter goes before the environmental court of appeals for further hearings and a decision. This process could take up to 12 months. Our base case assumption is based on the permitting process proceeding to the Environment Court for the full duration of 12 months. Our study has assumed a full 12 months of hearings as a base case. I will point out that we have assumed -- we had assumed something similar with Martha Underground, which didn't require a court hearing. Permitting will be the critical path for us on this project, however. We have been going through this process for the last 30 years. We understand the process. We have credibility with stakeholders and government. We will work hard to demonstrate how we will manage our environmental and social impacts while delivering a significant socioeconomic benefit to the region. On that, we'll move to Slide 29 and specifically what these benefits may be. We expect the project to provide meaningful socioeconomic benefits for stakeholders over the life of the Waihi District. Specifically, we expect the assets to deliver meaningful socioeconomic benefits to the regional communities in New Zealand, particularly in a post-COVID-19 environment. Based on the requirements outlined from the PEA, we expect to create an additional 200 to 300 direct full-time jobs to support the project. This addition will increase our employment to around 700 direct jobs, making us the major employer in the region. In addition, we estimate it's an incremental 500 to 1,000 indirect jobs as a result of the investment in the expansion of our operations. Over the course of the mine life, we are estimating an in-country investment of approximately $1.4 billion. This operation is expected to generate nearly $0.5 billion in direct taxation revenue for the government and an additional $125 million in royalty payments, which mainly benefit the regions. I will now turn the presentation back to Michael. Thank you.

Thank you, Mark, and thank you, Craig, for outlining in great detail, the 4 projects that make up the Waihi District study. I'll go through the final slides of this presentation, outlining the next steps and the potential opportunities and risks before we turn it over to Q&A. Moving on to Slide 31. This is a high level look at the expected time lines over the next several years, which, of course, is subject to further refinement and optimization. In the near term, we expect to complete a feasibility study for Martha Underground in the first half of 2021 and convert indicated resources to reserves. The permitting process has commenced, and we have used conservative time lines, as Mark has mentioned, as our base case in this study. Exploration is continue -- is expected to continue for several years. We haven't fully defined or delineated the resource at Martha Underground, and we continue to believe WKP will grow into a multimillion ounce deposit. This will take a considerable amount of time to prove up. However, we have an initial resource of over 1 million high-grade ounces based on only 35,000 meters of drilling to date. Development of WKP is contemplated to start in the second half of 2023, with first production in 2026. However, there are risks and opportunities on both fronts. [Technical Difficulty] first of [ 2020 ] with production in the second half, the latter. Martha Open Pit is currently envisioned as the first half of 2025 start of development and the first production in the first half of 2027. Permitting may also represent both an opportunity and a risk with the New Zealand economy heavily dependent on some sectors that were significantly impacted by COVID-19 crisis. The government is looking to other sectors to kick start the economic recovery. They have mentioned removing the red tape from the permitting process, and that may allow for a more streamlined process, thus could mean earlier production. Conversely, the permitting process may be protected depending on whether the decision goes to the Environmental Courts and how long it stays there. The typical time frame for a decision by the Environmental Court is 12 months, which is what we have assumed as our base case. It's important to note that WKP and the other opportunities are shovel ready. And we look forward to working with the government to bring these projects forward and deliver the significant socioeconomic benefits the district opportunities will bring to the rural communities in the [ core mantle ]. Moving on to Slide 32. We have outlined a robust set of opportunities with strong potential economics, significant potential value creation for shareholders and significant socioeconomic benefits for our stakeholders in New Zealand. These results are just the first indication of the potential of the Waihi District opportunities. As we advance the project and continue to invest in exploration, we believe there is a significant upside potential particularly at Martha Underground and at WKP. With Martha Underground, this study only utilizes about half of the reported resource due to the need for further exploration to tie-in stranded resources within the mine plan. We have confidence the additional resources will make it into the mine plan through further drilling. The delineated exploration target at Martha Underground represents the potential to significantly increase the mine life. Drilling at Martha Underground is expected to continue for several years. WKP represents the most significant upside for the Waihi District given the limited drilling to date. As you've seen a few times throughout this presentation, production at Waihi with WKP sits at around 250,000 ounces a year mark, even peaking at over 300,000 ounces in 2028. We have a lot more exploration drilling ahead of us at WKP. And through further exploration success, we are confident to maintain strong annual production levels and extend the mine life of WKP well beyond the 2031 mark. The strong production levels are also at the first quartile all-in sustaining cost. By extending Martha Underground and WKP, we have an option of preferentially treating high-grade mill feed in favor of the lower grade mill feed sources from Gladstone and the Martha Open Pit. As Mark mentioned, we could look at further expansion of the process plant to allow for the Open Pit feed with the Underground feed. With further work ahead of us, development, exploration and studies, we will further refine our input parameters from the operational perspective. Moving on to Slide 33. Today, we are one of the most undervalued stocks in the industry with one of the most compelling organic growth profiles. And the Waihi District in New Zealand represents the largest value-creating opportunity we have in our portfolio today. With so much drilling ahead of us, it's important for me to highlight that the Waihi District study is a PEA-level study that includes a proportion -- a portion of reported resources, and thus, we believe, captures only a fraction of the value. It will be clear that permitting and consenting is the critical path for success. It is the critical path for us to deliver on our commitments, deliver the significant economic benefits for New Zealand that we've outlined and create the hundreds of jobs we have estimated. We have very successfully consented dozens of projects over the past 30 years. We know the process. We have a solid reputation as a valued corporate citizen, and we are highly committed to New Zealand. We have a strong history of responsible mining in New Zealand and look forward to continuing to contribute to the communities in which we live and work. And finally, today, we continue to manage the business for the near-term and plan for the long term. We have a strong asset base, an exceptional team that is acutely focused on making long-term decisions while delivering consistent positive results. As I mentioned, we are shovel ready and ready to work with the government and other stakeholders to advance these exciting opportunities forward. With that, I will now turn it back over to Sam for Q&A.

Thank you, Michael. So that concludes the formal presentation segment of the webcast. I will turn it over to the webcast moderator to facilitate the Q&A session.

[Operator Instructions] And your first question will be from Reg Spencer at Canaccord.

Michael and team, very comprehensive presentation this morning. My first question is just fleshing out the opportunity to accelerate the permitting process a little bit. Obviously, you have outlined quite a conservative consenting program there. Can I just clarify that the opportunity to accelerate that revolve around one, if you can avoid having to go to the Environmental Court, but also two, even factoring that in, and lets we assume that you can reduce that permitting time by 6 to 9 months or 9 to 12 months as you outlined in the presentation. That is still quite a long lead time to bring on WKP. Are there any other opportunities to bring that -- the development of that deposit forward?

Yes. Thanks, Reg. It is, as I mentioned, one of the critical path for us. We have successfully permitted dozens of projects in New Zealand over the past 30 years, including most recently the Martha Underground project, which was permitted 6 months ahead of schedule. We understand the permitting regime in New Zealand, and we take no shortcuts. And we engage extensively with the regulators and the stakeholders, and we have a strong reputation as a responsible miner in both the North and South Islands. We have taken a conservative approach to the permitting time lines, particularly at WKP and have allotted the 12 months for the potential hearing in the Environmental Courts. And this is why we have WKP going to production in 2026. We have allocated 6 months for potential Environmental Court hearing for Martha Underground in the past, and we've never ended up there and received the permit ahead of our original time line. But it is important to note that WKP and the other opportunities are shovel ready, and we look forward to working with the government to bring this project forward and deliver the significant socioeconomic benefits. So for us, it is working with the governments and ensuring what they are, it's -- we are dealing with the regulators and the government showing the benefits of the projects, and we are consistently looking at opportunities for moving projects forward, particularly WKP, which -- with having a look at the opportunities for an exploration decline, as has been mentioned.

So just to follow-on from that. Can we -- if we were to assume a best-case scenario would that mean that the whole project will be brought forward by approximately 12 months? Is that a best-case scenario where you avoid Environmental Court requirements?

Reg, we'd love that to happen. But look, at the moment, that's certainly one of the scenarios we're looking at, but we have put in the base case to follow the process and assume that we will go to Environmental Court. And so we're sort of -- we're sticking to that with the base case, but it's certainly one of the scenarios we do look at, and we do work on.

One last question. Just looking at your assumed grades as part of the PEA versus the resource grade, clearly, there is some mining dilution to have to factor into that. Has -- do you feel like sufficient work has been done to that to understand that grade dilution? Because even a slight reduction in the dilution could have quite a material impact on your head grade, especially from WKP. Have you got any comments around that?

Yes. Thanks, Reg. It is a PEA study. And so there is a level of conservatism in there. And with the drilling and the understanding of the ore body, we've sort of pegged that dilution at the figures that we've sort of currently got at the 14%. Through further exploration drilling and further mine planning, we'll look at what we have to do there to sort of refine those dilution figures. And yes, you are correct. Anything that we can do with the mining methodology to reduce that dilution will have a significant benefit.

Next question will be from Mike Parkin at National Bank.

Michael, congrats on a good study. I got a few questions here that kind of jump all over the place. First, could you give a -- just an idea of what are -- what your discovery cost per ounce has been at WKP? I believe it's well below the average. But off the top of my head, I don't have it.

Yes, sure. I'll hand that over to Craig. Thanks, Mike.

Mike, we've had a good run at WKP, the dollar per ounce as a resource discovery cost sits around $14. We can credit that to a great hit on the EG vein and pretty much every hole after that contribute to a resource, so remains low. And Martha Underground is not much more. So it's a very good dollar per ounce delivery.

And can you remind me again, the budget for this year for WKP for exploration?

Yes. We have about 6,000 meters allocated and around $3.5 million to $4 million.

Okay. Great. And then with a big investment like this, do you get any kind of tax holiday, any recoup for capital before you become cash tax?

Yes. Thanks, Mike. The -- it's important to understand that the investment goes over the -- a period of time, 8 years as we sort of ramp up the different projects. With regards to tax, Scott, have you got an answer to that?

Sorry, Michael, I just had a bit of interference there on the question. Can you just repeat that last bit on the tax?

Yes, sorry. I might just have a bad connection. It's regarding the tax holiday on the capital, like your growth capital that you put in on these various mines. Does that give you a tax holiday and do you get to recoup that before you become cash taxable on each mine? And if there's any kind of funniness in terms of how that gets treated, given you've got multiple ore sources all coming back to one location?

Sure. Yes, good question. Now in the past, New Zealand did provide a fairly generous accelerated tax arrangements for upfront capital on a range of activities that's been tightened up over the last few years. Essentially, most capital follows the accounting process now with the exception of exploration, and those costs are generally deductible upfront. So it's not a huge timing benefit in terms of taxes.

Okay. And with the pit wall design on the Martha Open Pit, is there any change on that? Are you keeping the same angles that you used previously or backing them off a little bit?

Okay. Thanks, Michael. I'll hand that over to Mark -- that question to Mark.

Yes, Mike. Obviously, we know a lot about the geotechnical aspects of the pit. And yes, we've taken all the previous experiences into account. So there's quite a number of geological areas there. And so some parts of the pit are laid back further than others. And so that's certainly being taken into account in the pit wall. So it's not -- if you're asking the question, is it aggressive? The answer to that is no.

Okay. Great. Super. That's good to know. And then just last question. The mining fleet, you mentioned you're moving -- everything will be owner operated. Will that -- is that included in the growth capital for purchases? Or do you plan to lease that? And if it's leased, is that factored into the economic analysis?

I'll take that if you don't mind.

Yes. Thanks, Mike.

Sorry, Mike. Yes, it assumed to be leased and it is factored into the economic numbers.

Next question will be from Nick Herbert at Crédit Suisse.

A couple for me, please. Firstly, the mill expansion, the potential to go to that 2.3 million tonnes per annum. Can you just talk a bit more about what you need to see to support that decision just in terms of exploration success? I know you mentioned the processing of the lower grade open pit material was a consideration. But what else would you need to see from the underground? And then also just indicatively what that could cost in terms of CapEx?