OceanaGold Corporation (OGC) Earnings Call Transcript & Summary

Good morning and afternoon, ladies and gentlemen. Welcome to the OceanaGold 2021 Third Quarter Results Webcast and Conference Call. [Operator Instructions] Also, note that the call is being recorded on Thursday, October 28 at 5:30 p.m. Eastern Time. And I would like to turn the conference over to Sam Pazuki. Please go ahead, Sam.

Thanks so much, Sylvie. Good evening, Good morning. Welcome to OceanaGold's Third Quarter 2021 Results Webcast and Conference Call. I am Sam Pazuki, Senior Vice President, Corporate Development for OceanaGold. I am joined today by Scott Sullivan, Chief Operating Officer and Interim CEO; Scott McQueen, Chief Financial Officer; Sharon Flynn, EVP Sustainability; David Londono, EGM, Haile Operation; David Way, EGM, Philippines and New Zealand; and Craig Feebrey, EVP Exploration. Moving on to Slide #2. 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. I refer you to the disclaimers on the forward-looking statements in our presentation. I will now turn it over to Scott Sullivan to walk you through the key highlights of the quarter. Over to you, Scott.

Thanks, Sam. Good evening, Good morning to all. It's a pleasure to be with you here today. Firstly, I'd like to add that it's wonderful to be with OceanaGold, a company with a long and rich history in the gold mining industry. Although, I've only had my feet on the ground here for the past 5 weeks or so, I've been really impressed with the quality and the potential of the assets in the portfolio, and the highly talented workforce that we have throughout the organization and the strong shareholder base. We do understand we have work to do to regain market credibility and our reputation in the gold mining industry as a business that generates healthy margins, returns capital to shareholders, and makes prudent capital investments on high-margin growth opportunities. Although, early days for me here, I am very confident in the long-term future of the business and what I can assure the investment community is that together with the Board, the executive management team and employees across the organization, we are fully aligned and committed to improving our operational performance and delivering long-term sustained value to shareholders. So if you look at Slide 3, looking back at the third quarter, I'm pleased with the financial performance of the business, and it does reflect the importance of having a diversified portfolio of assets. We delivered our fourth consecutive quarter of improved profitability primarily related to the renewal of the FTAA, paving the way for gold-copper concentrate sales from Didipio and continued strong performance at Haile. The Didipio restart activities continue to progress well despite the sometimes restrictive measures that we have enforced in the quarter to safeguard the health and well-being of the workforce, following an increase in COVID-19 positive cases. We are pleased to achieve some key milestones in the third quarter and in the beginning of the first quarter. Firstly, we begun underground mining at Didipio, a month ahead of schedule with ore development. The ore is being delivered to the ROM pad ahead of milling, which we expect to begin mid-November. Secondly, we successfully completed the transportation of the gold-copper concentrate inventory on hand on October 2. We invoiced over $60 million in revenue and received approximately $38 million in cash as at the end of the third quarter. And third, we have achieved a critical mass in our equipment efforts that has allowed us to achieve these milestones and continue to progress restart activities. At Haile, we delivered a stronger-than-expected third quarter, mainly a function of better-than-expected grades out of our Ledbetter Phase 1 pit. With the stronger year-to-date performance, we are again increasing our guidance range at Haile and now expect the operation to deliver 175,000 to 180,000 ounces of gold. We continue to advance the Haile Technical Review that will culminate in a new mine plan expected to be completed in the first half of 2022. We are pleased to maintain our consolidated full year guidance, which again reflects the importance of having a diversified portfolio of assets. We are expecting higher production from Haile and Didipio to offset the softer production forecast now for the New Zealand operations. Moving on to the next slide. We are very pleased to see the Didipio contributing again to the business with third quarter sales of over 19,000 ounces of gold and 3,400 tonnes of copper. Consolidated production year-on-year was driven higher by Haile and partially offset by Macraes. Third quarter production was expected to decrease quarter-on-quarter and was in line with our expectations as Haile delivered a better-than-expected performance, while the New Zealand operations were impacted mainly by the nationwide lockdown. All-in sustaining costs for the quarter and year-to-date decreased over the previous reporting period, which was mainly a function of higher sales volumes, partially offset by higher operating costs and increased capital investments mainly related to the Haile expansion, Martha Underground ramp-up of Waihi and pre-stripping at both Haile and Macraes. Financial results for the quarter were solid and driven mainly by Didipio gold and copper sales and continued strong performance at Haile. Our adjusted earnings per share came in at $0.07, which was ahead of estimate, while cash flow per share came in at $0.12 before working capital movements and excluding the physical delivery of the remaining gold ounces as a part of the 2020 gold prepayment arrangement. I will now turn the presentation over to David Londono, EGM at Haile to walk you through the Haile results. Thank you. David?

Thank you, Scott, and hello, everyone. Moving on to Slide 5. We had a very good quarter of gold production at Haile with nearly 46,000 ounces produced. This was above our expectations with better-than-expected grades 9 out of the Ledbetter. Although, grade reconciliation was about 20% higher than predicted, we believe these to be near-term benefits, and we fully expect to align more closely to the resource model going forward. Mining operations were mainly at Ledbetter Phase 1. And in the third quarter, we were focused on waste stripping ahead of increased ore mining going forward. As we progress through this stage of Ledbetter, we will go through a period of materially lower grades, which we expect to continue to see for the first half of the next year. Mining rates are steady. However, we continue to be limited by the permitted area allowing for additional PAG waste, storage facilities and water discharge with the continued delays in receiving the SEIS associated permits. Main phase was lower quarter-on-quarter on decreased throughput rates related to processing [indiscernible] from Ledbetter. We continue to implement glass fragmentation initiatives to push throughput rates higher not only with Ledbetter ore, but through all pits. All-in sustaining costs increased quarter-on-quarter, mainly due to increased pre-stripping capital, which is tracking higher than originally guided. This reflects a higher allocation of mining cost to capital than previous forecasted but the amount of total spend is unchanged. With the year-to-date performance, we have increased our production guidance at Haile for the second time this year. We now expect Haile to deliver a full year gross production between 175,000 and 180,000 ounces. Despite the reclassification of mining expense to capital, the all-in sustaining cost guidance remains unchanged at $1,100 to $1,150 per ounce sold, while cash costs have decreased to $650 to $700 per ounce sold. Moving on to Slide 6. We continue to progress the Haile Technical Review. This review is intended to maximize cash flows from the operation and maximize the value of the assets. We're already implementing changes to the operation, which will begin to bear fruit over the near-term. I do expect some more quick wins. However, some changes are more structural in nature and will take some time to implement. The primary focus areas of the clinical review as follows: operating costs, capital allocation, water management, PAG and waste management, and employee turnover. More specifically, on the mining front, we're starting to see the benefits of changes that we made so far, such as improving whole roads on open pit and road drainage. Unlike the past, when mining operations shut down during heavy rainfall, we don't stop now. We continue mining unless there is inclement weather, such as hurricane or lining. The improvements to the roads have also doubled the life of the whole truck tires, which just 6 months ago were averaging 3,000 hours are now averaging over 6,000 hours. My target is to achieve 7,500 hours in the medium-term. My expectation is that these changes will drive maintenance costs lower and increase mine utilization rates while increasing productivity. Last year, mine utilization was in the mid-50s, we're now at the mid-70s, and my objective is to achieve a mine utilization rate in the mid-80s. Mining operations were previously driven by volume. This is how coal mines work. Haile is a coal mine and the ore body is geometrically complex and does not lend itself well to bulk mining approach. We will refocus our efforts on the quality of the ore we mine and deliver to pros plan. Going forward, we will be implementing an RC drilling program for all grade control and for improved PAG waste specification. We will configure at least one of the shows to our backup configuration as well to be able to mine more selectively. These efforts will be designed to reduce our dilution and optimize PAG waste that we are required to deposit in specialty line waste facilities. Over the near-term, particularly as we continue to wait for the SEIS permits, we do need to continue managing 2 critical aspects of our mine operations. One is water management and the other one is waste management. First, on water management. We are limited by the capacity of the water treatment plant and given that the rainfall history of Haile is well documented, you'll know that we have a considerable amount of water that needs to be discharged. The weather has been cooperative this year, which has helped greatly. We have also added evaporators and will be purchasing more units later this year. We're expecting these units will reduce our water levels by approximately 30%, which again is very significant. With the SEIS, we will be able to expand the water treatment plant and discharge higher rates of water. Until then, we have to move water around and at least for next year, we may have to slow mining efforts due to restricted access to lower ventures. On the waste management front, our mining approach to date has produced more PAG waste than forecasted, mostly due to the way PAG waste material has been classified in our permits. As I mentioned, with more selective mining, we can reduce the PAG waste of the life of the mine, even below the levels assumed in last year's technical reports. Additionally, we will work with the regulators to demonstrate with the use of scientific data and a classification of some of the potentially asset-generating material so that we can store these waste safely in traditional waste storage facilities. While we wait for the SEIS, we have to store PAG waste in active pits and we handle more than necessary. These factors have been contributors to operating unit cost being higher than expected or reflected in the technical report. We will always work to drive operational efficiencies and lower costs. However, we are focused on controlling costs while meeting these restrictions and ensuring we're being realistic on what we can drive our costs down through as part of the clinical review. The unit cost assumed in last year's technical report will be difficult to achieve. However, they may also not be too far from -- off the market. Either way, the mine plan will assume achievable cost assumptions, which will increase our cut-off grades and increase the cut-off grades to result in the reclassification of some of the mineral reserves. Again, I will reiterate though that we will not be mining marginal ounces or ounces that destroy value. We will be more selective in what we mine and process so that we generate strong free cash flows and sufficient risk-adjusted returns for shareholders to maximize the value of the asset. For me, I will not be measured by how many ounces of gold we produce at Haile. I will be measured by how much free cash flow we generate. This is the culture that I'm still in at Haile now. On the processing side, there is some work we will need to do. The glass fragmentation improvements we have mentioned are expected to drive higher triple rates and increasing mill utilization. It will help with blending of all that will improve processing kinetics with an aim to improve steady-state gold recoveries. We have made other improvements already, such as increasing the emergency stockpile from several hours to 7 days. This means that we have downtime of the primary crusher, the mill will continue to run. All in all, we expect to deliver our new life-of-mine plan in the first half of 2022. Again, the implementation of changes is ongoing, and the value realization is expected progressively over the next 18 months. Some of these changes are expected to deliver near-term value, while other changes are more structural in nature and will take additional time to implement and drive value over an 18-month period. The timing of the new mine plan will also be dependent on the receipt of the SEIS and associated permits. Moving on to Slide 7. The Haile SEIS process continues, and the company now expects the final SEIS, the record of decision and related permits in the first quarter of 2022. As I have laid out just a few minutes ago, these permits relate to the expansion of the operated footprint to accommodate waste stockpiles, expansion of the water treatment plant to allow for higher water discharge rates as well as development of the Haile Underground. Engagement with the U.S. Army Corps of Engineers and South Carolina Department of Health and Environment Control is ongoing as the company responds to inquiries received post release of the Draft SEIS. We have also worked closely with local stakeholders who are supportive of what we are proposing. Although we don't see any shop stoppers and the process in itself is complete as we await a decision, we have had to implement workarounds to accommodate water and waste. Should the SEIS process continue to be delayed, then we will have no other choice but slow down mining and in the meantime, incurring mining costs related to waste, rehandling and water management. We will continue to engage with the regulatory agencies on a weekly basis. We have continued constructive surface infrastructure related to underground operations. We can develop the portal. However, we required the SEIS permits to begin building the underground tunnel and mine. Once underground, we expect to drill extensively to expand the current resources at Horseshoe and Palomino and drill test new targets. We continue to see great potential for reserve and resource growth through underground targets. I will now turn the presentation over to David Way.

Thank you, David, and hello, everyone. On Slide #8. In New Zealand, the government announced a 2-week nationwide lockdown to address the spread of COVID-in mid-August. This order impacted both of our New Zealand operations, which were essentially shut down for the duration of the lockdown. On September 1, we recommenced operations at both Waihi and Macraes in a staged approach, which aligned with the government COVID-19 regulations. At Macraes, we produced 25,720 ounces of gold in the third quarter, which decreased quarter-on-quarter due to the nationwide lockdown. The restart and ramp-up of operations was slower than expected due to subsequent regional lockdowns impacting timing of supplies and movement of workers. These included the gradual easing of restrictions from Level 4 being a lockdown to Level 3, which still restricts access to the operation and then, to the current Level 2, which has some limited restrictions. The other complexity for us at Macraes this year is that we have had to weather geotechnical constraints at Coronation North and reduced throughput rates from planned and unplanned mill disruptions. We've essentially been playing catch up all year. The good news, however, is that full operations were restored at the end of the third quarter. The process plant issues are behind us, evidenced by currently achieving record throughput rates, and we are making good progress on mining across all fronts. I'm also pleased to announce that we have achieved first ore from the Golden Point Underground as planned. With these improvements, higher throughput rates and better grades, we expect to deliver a rebound quarter to achieve our narrowed guidance range of 138,000 to 143,000 ounces of gold for the year. I'm also pleased to announce that late in the third quarter, we welcomed Mike Fischer as the new General Manager for the Macraes operation. Mike has extensive mining experience, having recently worked in Mongolia and before that as President and General Manager of the Kumtor mine. His extensive experience and leadership will serve the Macraes operation and OceanaGold well going forward. I'll now move on to Slide 9. Waihi produced approximately 7,500 ounces of gold in the third quarter. The third quarter production was also impacted by the 2-week shutdown of all operations as part of the New Zealand government's mandated COVID-19 lockdown measures in August. Ramp-up of operations was further impacted by ensuing regional lockdowns affecting the workforce, supplies and equipment availability. Despite the lockdown, development at Martha Underground progressed with 2,185 meters of advance achieved for the quarter, even though impacted by the COVID-19 lockdown in August. Development continues to focus on the Rex, Royal West and Edward mining areas. Production in Rex and the upper levels of Edward also began late in the quarter with 6,600 tonnes of stock ore mined. Through the course of mining the Edward vein, we have experienced some negative reconciliation and have subsequently updated our resource model, which will affect our near-term production, particularly in the fourth quarter. The 2-week lockdown compounded the impact by deferring alternative high-grade battles to next year. As a result, the Waihi mine is now expected to produce between 30,000 and 35,000 ounces of gold with a revised all-in sustaining cost guidance range of $1,525 to $1,575 per ounce. We do not expect this to have a long-term impact on the operation with resource definition and grade control programs advancing well. On the exploration front, the 2-week lockdown meant no drilling during this period. For the quarter and much of the year, drilling continued to focus on the Martha Underground, mainly for resource conversion and definition. At the Waihi North project, we had originally planned on drilling 10,000 meters at Wharekirauponga. However, the lockdown along with an extended seasonal drought means we will fall short of our drilling target. The drilling we have completed this year at Wharekirauponga has focused mainly on resource conversion of the East Graben vein with a step-out hole testing the extension of the East Graben structure alongside to the Southwest. We continue to be very pleased with the drill results. Drilling this year has extended mineralization of the East Graben vein now with a 1.2 kilometer strike. Drilling is also supporting the technical studies underway for the pre-feasibility study. Preparation for the lodgment of a consent application for the Waihi North project, inclusive of the Wharekirauponga Underground Mine continued to progress with environmental assessments nearing completion. Over the next 2 quarters, we will continue engagement with a broader group of stakeholders as part of the consenting process. We expect to lodge our formal consenting application inclusive of stakeholder feedback with the regulator within the first half of 2022. We continue to advance the technical studies as part of the consenting and pre-feasibility study work stream. The work is ongoing and supported by resource conversion drilling at Wharekirauponga. Although the pre-feasibility study is contemplated for completion in the first half of 2022, we have increased the scope and may increase the scope further. Additionally, we are looking to permit our third drill rig to focus on extensional drilling at Wharekirauponga to further enhance the project value proposition. The point is that the opportunity of Wharekirauponga is too compelling for us to rush through some of the work necessary to properly advance this project. The impact on the timing of such work is being considered and could result in extending the date of completion of the study. Turning to Slide 10. I have recently returned from spending 6 weeks in the Philippines and at Didipio. The Didipio restart activities continue to progress well with key milestones achieved during the third quarter and into the fourth quarter. These milestones include the following: successful transport of the gold-copper concentrate, recommissioning of the primary crusher and undertaking critical maintenance activities of the process plant, recommencement of underground mining, and delivery of underground ore to the ROM pad, which will continue to progress. In the third quarter, Didipio recorded sales of 19,151 ounces of gold and 3,356 tonnes of copper. Also, in the third quarter, 1,096 ounces of gold and dore was sold with remaining sales related to the gold-copper concentrate. And at the end of the third quarter, we had received approximately $38 million from the sale of the concentrate, representing approximately 60% of the total mineral value of the full inventory. The remaining funds will be received in the fourth quarter. Recruitment and training activities remain the critical path to restart and ramp-up activities. These activities are tracking to plan with recent recruitment activity having been slowed to address the increase in COVID-19 cases. Despite this, we do have a critical mass to safely ramp-up operations. Recruitment activities are ongoing, and we continue to expect to achieve 90% recruitment of the complete workforce by the end of the year. Processing plant restart and ramp-up activities continue to progress ahead of first mill feed expected in the middle of November 2021. In the third quarter, we completed several key activities, including maintenance milestones of Ball mill motor replacement, SAG and Ball mill gearbox and lubrication system upgrades, relining of both the SAG and Ball mills and conveyor belt replacements. In mid-September, the primary crushing circuit was successfully recommissioned leading to the recommencement of crushing emergency stock feed. Currently, approximately 75% of the process plant restart activities have been completed. We are tracking to plan for the restart of milling expected in mid-November 2021. Underground mining restart activities continue to advance well, with continued and ongoing recruitment and training of underground operators, completion of safety inspections, upgrades to underground mine equipment, including pumping facilities and the delivery of supplies and equipment. During the quarter, our Sandvik Rhino 100 mobile raise borer rig and Sandvik TH663i underground haul truck were delivered successfully. Prior to the end of the quarter, we began underground mining activities with the first 2 development cuts resulting in a total of 625 ore tonnes delivered to the ROM pad. The commencement of ore development is approximately 1 month ahead of schedule. We expect stope development to commence in November. Again, COVID-19 remains a risk to our restart and ramp-up plans. But despite a jump in new cases in the third quarter, everyone affected recovered without any serious illness. We continue to manage the risk, and we are working with local authorities to facilitate vaccinations. October 19 protocols for Didipio include testing and screening before mobilization and entry to the operation, precautionary isolation measures, regular rapid testing and screening of the workforce, and ensuring testing capability and capacity with efficient turnaround results. Currently, approximately 70% of the OceanaGold Philippines workforce has received at least 1 dose of the COVID-19 vaccine with 55% of the workforce being fully vaccinated. For the fourth quarter, Didipio is now expected to produce between 7,000 and 12,000 ounces of gold. This was previously 5,000 to 10,000 ounces and also to produce 1,000 tonnes of copper, with the range reflecting the ongoing risks noted. For the full year, Didipio gold sales are expected to range between 25,000 and 30,000 which was previously 23,000 to 25,000, whilst copper sales are now expected to range between 4,500 and 5,000 tonnes. 2021 all-in sustaining costs is now expected to be between $100 and $150 per ounce sold. Moving on to Slide 11. Here, we have a couple of photos. One of the first cuts taken underground and the other illustrating the resumption of crushing. We are very pleased with the progress at Didipio and look forward to providing additional progress updates to the market. I'll now turn it over to Scott McQueen to walk you through the financial performance of the business.

Thank you, David, and hello, everyone. Over the next few slides, we'll cover the key elements of our third quarter and year-to-date financial results. As Scott's already mentioned, and I'm also pleased to report, the third quarter represents the fourth consecutive quarter of improved profitability for the company, noticing also that the prior quarter was one of the most profitable in the past 3 years. Adjusted net earnings for the quarter were $53 million or $0.07 per share. This takes the year-to-date adjusted net earnings to 16% -- $0.16 per share fully diluted. The quarter-on-quarter improvement in profitability was driven by the value realization on the Didipio inventory, the majority of which we managed to transport and invoice within the third quarter, which was ahead of plan. Plus, approximately $17 million or just over $0.02 per share was related to onetime tax credits on the recognition of tax losses and other temporary differences as we again generated revenue in the Philippines. While gold sales from Haile were lower quarter-on-quarter, they did exceed expectations, which partially offset a weaker performance in the New Zealand operations, where both were impacted by the nationwide COVID-19 lockdown. We are looking for a material rebound of both New Zealand operations in the fourth quarter. At Haile, the fourth quarter sales are expected to reduce consistent with the grade profile. Didipio sales will also be reduced given the bulk of the inventory was invoiced in Q3. However, the production ramp-up will continue ahead of more significant and sustained contribution into 2022. The combination of these operational factors, also noting the onetime Philippines tax credits we did recognize in Q3, means we do expect a softer final quarter in terms of underlying group profitability. Operating cash flow increased $33 million this quarter, while EBITDA was in line with the prior quarter. The third quarter included a lower level of prepaid sales, which totaled $17 million as compared with approximately $60 million in the prior quarter. We completed the final physical deliveries into the prepay in July. And as we stand today, and at the end of the quarter, we have no hedging contracts in place. Investing cash flow increased slightly to $83 million, representing the highest quarter of investment we expect for the year. Year-to-date cash flow for investing activities has totaled $236 million with higher capitalized mining costs and growth capital investments at Haile, the continued ramp-up of the Martha and Golden Point Underground and ongoing exploration. Financing cash flow in the third quarter included the drawdown of $50 million from the revolving credit facility as we move through the low point in the liquidity cycle, commenced the monetization of the Didipio inventory and shifted focus there to the ramp-up of operations. As advised during the July webcast, also at the beginning of the third quarter, we did close an additional $30 million short-term working capital facility, which remains undrawn. Operating cash flow, excluding working capital movements, equated to $0.12 per share for the quarter, bringing the year-to-date cash flow per share to $0.34 fully diluted. Moving on to Slide 13, where we talk about our capital investment. Consolidated capital expenditure in the third quarter was $91 million, a slight decrease quarter-on-quarter with lower growth capital invested, partially offset by our higher capital mining costs. Year-to-date capital expenditure of $255 million increased approximately 30% over the prior year, reflecting increased capitalized mining cost at Haile, Macraes and Martha Underground, along with the planned investments associated with the Haile expansion, the development of the Martha Underground at Waihi, and the Golden Point Underground at Macraes of ongoing exploration activities principally focused in New Zealand. Third quarter capital expenditure of approximately $56 million at Haile primarily related to the ongoing expansion of mining operations, including the construction of the third tailings storage facility wall lift, heavy earthworks to construct potentially asset-generating waste storage facilities. Capitalized pre-strip at Haile is expected to be higher than originally guided, reflecting an allocation from mining cost to capital expenditure, higher than previously forecast. As this is a reclassification, there's no change in total mining costs or impact on side ASIC. However, updated guidance does include a corresponding reduction in the forecast site unit costs -- cash costs, sorry, of approximately $200 per ounce, consistent with the increased allocation of operating cost to the balance sheet. Macraes total capital expenditure of $18 million for the quarter, primarily related to capitalized mining associated with the development of the Deepdell North open pit, plus additional stope development opportunities identified in phrases underground. Third quarter capital spend at Waihi of approximately $7 million related to the now completed SAG mill upgrades, along with ongoing development of Martha Underground. We're also focused on enhancing our capital allocation program to ensure we are generating increased cash flow. We expect 2021 will be peak growth capital year. However, with budgeting and planning in full swing, combined with the ongoing technical review at Haile, we won't have the full details for 2022 until early next year. Moving on to Slide 14, which includes a bit more on the balance sheet. As at September 30, you see our cash balance stood at $113 million, with total immediately available liquidity of $143 million. Total net debt was approximately $257 million. The quarter-on-quarter increase in cash reflects the drawdown of $50 million from the revolving credit facility and $38 million collected on the sale of Didipio inventory. We expect liquidity to remain relatively flat across the fourth quarter with improved free cash flow coming out of the New Zealand operations and further receipts from the sale of Didipio's inventory, offset by the Didipio ramp-up in production costs and the soft quarter of production at Haile, where grade is expected to be lower. Capital expenditure across the business is also expected to reduce in the fourth quarter. As part of our capital allocation process, we are committed to and focused on increasing cash flow from every operation to support a balanced business, one that returns capital to shareholders, reduces debt and reinvests in high-margin projects that will generate positive returns such as WKP. I will now turn the presentation over to Sharon Flynn to discuss our ESG efforts.

Thank you, Scott. Responsible mining is fundamental to the way we do business and the health and safety of our workforce is a top priority. At the end of the third quarter of 2021, OceanaGold reported a 12-month mean moving average TRIFR of 3.9 per million hours. This is up from 3.7 per million hours at the end of the previous quarter. In the past quarter, there has been a strategic refocus on safety leadership to engage with the workforce, drive a sustained safety culture and build on workplace hazard identification and injury prevention. In response to the ongoing COVID-19 pandemic, the company continues to enforce workplace protocols to protect the health, safety and well-being of employees and contractors. Since the commencement of the pandemic in March 2020, the company has recorded 378 confirmed cases of COVID-19 among employees and contractors globally. This includes 186 new cases in the third quarter of 2021 at the Didipio and Haile operations combined. With continued risks related to COVID-19, the company has implemented additional controls for the Didipio operation, including rapid testing and precautionary quarantine requirements. We continue to encourage and promote employee access to vaccines, aligned, of course, with local government requirements. In the Philippines, we support local health agencies to secure additional vaccines, and we also sponsor community distribution. We continue to advance our key ESG initiatives that keep us at the forefront of best practice globally. We view ESG as an enabler of our business today and opportunities for tomorrow. In line with our commitment to achieve carbon neutrality by 2050, we continue to work on setting our 2030 interim targets. This includes better understanding of our direct and indirect energy consumption and our carbon footprint. We are also undertaking physical and transitional risk assessments for each of our operating sites to understand how our business can be impacted by climate change as well as other potential threats related to the transition pathway on that 0. We published our first standalone modern slavery statement in 2021 and in our 2020 sustainability report, we shared how we are knowing and showing our respect for human rights. In Q3, we continued implementation of human rights impact assessments across the company, launched an online timing module and continued development of our responsible supply chain approach. Work to align our tailings management systems to the global industry standard for tailings management has been progressed throughout the year, including review of corporate governance and accountability frameworks in Q3. We continue to progress towards the goal of 100% compliance with the World Gold Council's responsible gold mining principles by the end of 2022. I will now turn it over to Scott Sullivan to wrap up.

Thanks, Sharon, and thanks, everyone, for your updates. So I'm going to conclude the presentation by highlighting our top priorities that we currently have in the organization. As I mentioned at the onset of this webcast, there are many aspects of our business that are working well, but we've certainly got a lot of work ahead of us, so I can assure you that we are acutely focused on the task at hand and we'll prioritize accordingly. With my feet on the ground now for about 5 weeks, I can say comfortably that I have yet to see a challenge within the organization for which we do not or will not have a solution. And more importantly, as I've already stated, we have a highly talented workforce across the organization. And together, we will work hard and smarter to rebuild credibility within the market. To that end, we'll continue to restart and progressively ramp-up our operations at Didipio while managing the risks associated with COVID-19. We expect underground mining activities to progressively increase to full mining rates within the next 8 to 9 months. And then we'll be at full production rate of 10,000 ounces of gold a month and 1,000 tonnes of copper a month at first quartile all-in sustaining costs. And I think we can all agree that it's a pretty good time to be a copper producer. As David Londono has mentioned, we're having a good year at Haile and expect to deliver on our increased guidance and continue to advance the technical review forward to produce a new optimized mine plan. There will be some quick wins, but we will progressively implement more structural changes that will be designed to deliver long-term sustained value for shareholders. True to the company's commuted operational strategy, Haile will be in operation that maximizes cash flow, not one that mines ounces, the size for the sake of producing ounces. At Waihi we'll continue to ramp-up Martha Underground while advancing our understanding of a multi-mine project. Wharekirauponga is too high potential to rush, and we'll look to expand the drill program there while advancing the project through the consenting process. We're on track to lodge our formal consenting applications over the next 6 months. Driving operational efficiencies will never be a onetime effort. We will relentlessly pursue opportunities to drive down our costs and our position on the cost curve. We will continue to manage the risk associated with inflation that's led to higher fuel costs, cost creep on some of our suppliers such as reagents and materials. And additionally, we'll proactively manage the risks and demand for labor, particularly as the country borders open up and world economies expand to ensure that we've got the right people in the right roles and not only that we are able to attract talent, but we're retaining them as well. And finally and most importantly, we are currently reviewing and will enhance our capital allocation process, recognizing the importance of generating sufficient risk-adjusted returns and cash flows for shareholders. We will prioritize our capital spend internally, balancing capital needs with returns to shareholders and servicing our debt obligations. I'm very confident and fully invested in regaining our status as a top gold mining company in the industry, and I know our executives and our workforces globally share my enthusiasm for the journey ahead. So I'll now turn the call back over to Sam. Thanks, Sam.

Thanks, Scott. I will turn to the [indiscernible] of the Q&A session to the operator.

[Operator Instructions] Your first question will be from Matthew Murphy at Barclays.

I have a question on Haile. Thanks for the update on the Technical Review and the operating philosophy. Just wondering when you're talking about quality over volume, how we should think about that from a cut-off grade perspective? I think your reserves were at a 0.45 gram per tonne cutoff. What are you mining to now?

Yes, Matt, Sam here. Thanks for the question. I'll pass it on to David in a second here to comment on that. But basically, we're still in the process of going through the Haile Technical Review, still going through what the appropriate cutoff grades would be. As David had mentioned, if you look back the last couple of years or so, we've been really focused on mining material, bulk-tonne mining approach. And we need to be more selective basically, is the bottom line. We are obviously getting a good handle on our cost base for Haile going forward. But we want to make sure that we're using an appropriate cutoff grade so that, again, we're maximizing cash flows from the asset as opposed to mining ounces that have the potential to destroy value. And we don't -- we certainly don't want that. So we are -- again, we are going through the throes of this Haile Technical Review. We are well advanced in that study work, and we will come out with additional information, particularly as we complete the new mine plan. David, is there anything you'd like to add to that?

No, I think you responded pretty well. So the only thing that I have to add in there is that, yes, we're still in the 0.45 gram grade, but our mining grades that are well above that number. And whatever is coming down at that lower grade, we stockpile and we only use when we need to use it to keep the mill running. So as volume versus quality, if you know the coal mines, they want to move tonnes and tonnes. Right here, we want to move quality ounces. Those ounces that pay for themselves, and that not only for mining but also for processing.

Next question will be from Ovais Habib at Scotiabank.

Scott and OceanaGold team, congrats on a good quarter, especially at Haile. Just a couple of questions from me. Starting off with Didipio. Now, Didipio underground mining seems to be ahead of schedule, but it doesn't look like you've moved your guidance for full underground ramp-up that's taking place in Q3 of next year. Are you just being cautious on COVID impacts and continuing COVID impacts and cleaning implementation? Or are there any other contingencies that you're building in to Didipio underground ramp-up?

Yes. Thanks, Ovais, for the question. It's good to actually talk about Didipio and it being in operations. And it's certainly great to have Didipio back into the portfolio and contributing in the way that it has thus far. We have made good progress with restart activities and the ramp-up, and we are ahead of schedule, as you just pointed out, with respect to the underground. But as we've also pointed out, there are still some risks that we have to manage, particularly around COVID and making sure that, again, we're protecting and safeguarding the health and well-being of our workforce. It's also hurricane season, so we do have to factor that in. But we can say that progress has gone really, really well. We will continue to manage expectations going forward. But so far, we've had a good start at Didipio. And David Way, is there anything you want to add to that?

No, pretty much covers it. Thanks, Sam. But just to point out, I mean, yes, we have increased the guidance. And also, in terms of stoping, stope production, that's still on track to commence mid-November, which, of course, only leaves 6 weeks for the year and is also coincident with the start-up of milling as well, which is certainly not at maximum throughput either. So I think the guidance is fair. Thanks, Sam.

Yes, and just to add to that as well, Ovais. So milling, again, we expect to start that in the middle of November. It will be predominantly on the lower grade stockpile feed that we have on surface, which is 23 million tonnes at 0.3 grams gold, 0.3% copper. So as the underground ramps up, we'll progressively supplement mill feed with the higher grade ore that comes from the underground.

Okay. Sounds good, guys. Just on my next question is at Haile. In terms of Haile SEIS, now it's expected in Q1 of next year. I think David kind of talked about a little bit about plan B if it gets delayed further. Can you just reiterate what he pointed out and maybe give a little bit more color there?

Yes. I'll pass it on to David in a second. But as we've said thus far, I mean, the SEIS process has taken a little bit longer than we expected. We do still have very good engagement with the regulator, and that's the U.S. Army Corps of Engineers and South Carolina DHEC. And engagements basically on a weekly basis as we respond to any inquiries they've had since the release of the Draft SEIS. But we've had workarounds thus far with the operations, and we'll have to continue with the workarounds as we await the final decision and the associated permits, associated with that. David, over to you just to provide a little bit more color.

Yes. On the plan B, let's say, we don't get the SEIS in Q1 is that we're going to be storing some of the PAG material in some of the pits that are going to be inactive, which means that will be more rehandled than we would like to do. And same with the water and water, we're trying to discharge and move the water through the process plant or through the evaporators. But for the expansion, we need to get the permit from the SEIS. So that will be the plan B for us and keep mining on the upper benches.

Got it. And David, now you've been at Haile and kind of part of Oceana, I guess, for the last 3 months or a little bit more here. Any kind of comments you can provide on -- you've kind of talked about some low-hanging fruit in terms of operational improvements at Haile. Can you talk a little bit more on the mining as well as processing side? And I know you talked about a little bit about water management and waste management. But just other -- any other areas you can talk about in terms of improvements?

Yes. We're getting -- we're improving that fragmentation. And with that, we have actually increased our throughput at the mill going into what we want to be producing about 3.5 million tonnes a year going to 3.8%. And we're pretty much running at that rate right now, and that's as a result of the fragmentation. We are in the process of going all the way back to break the rock as much as we can. And then, once we are comfortable with that we are at the right place, we're going to start optimizing the use of explosives. But that's one big improvement that is already -- it's a quick win that we've already seen in the whole roads. We're seeing an increase on the tire life. We're seeing an increase in productivity of the trucks. We're seeing a decrease on damages, an increase on equipment availability. So those are low-hanging fruits that we're just kind of going for them and making sure that we use them.

[Operator Instructions] Your next question will be from Farooq Hamed at Raymond James.

David, I just want to follow-up on that last question that was asked. You're talking about the mill going to 3.8 million tonnes per annum. But in your prepared remarks, you also talked about mining more selectively and slowing down. Can you square those 2 comments for us in terms of how you look at the mill and your ability to feed the mill or fill the mill, given this new strategy or approach on the mining side?

Okay. So in the past, there was, let's say, the targets for the mine were even more 45 million tonnes or x number of million tonnes and the mill had different priorities. So there were competing targets. So the mine was dedicated to move tonnes and the mill would mill whatever they could get from the mine. We're changing the mentality and the mentality is we're going to mine even areas where we have the ore, we're going to mine selectively even if we lose a little bit of productivity, but we can now make sure that we reduce dilution that we mine better ore so the grade gets -- are we seeing a big improvement on the grade. And at the same time, keeping the mill full, which is our target. The target is to be able to keep the mill full and the mine delivering what we can deliver.

Okay. Maybe another question, David, for you. I think you said in this quarter, your grade at Haile was about 20% above what you were expecting. Can you give us some color on how that happened? What was different from what you were expecting? And going forward, how do you feel confident about your mine to mill reconciliation in terms of what you should be expecting in terms of grade?

So early in the year, we converted one of our shovels into an excavator and we move also from the lower benches instead of mining a 10-meter bench where you get a lot of dilution, we're mining in flitches. So we instead of mining 10 meters, 1 bench, we mined 3 benches at 3.3 meters each. And that will help also reducing the amount of waste that we include in the ore. So we don't have to process that much waste. That won't give any money, let's say, in gold. And so we -- that will be the biggest advantage of having that selectivity and have -- improving the mill throughput.

So that was what drove that better grade this quarter than you were expecting?

That is correct because we're going full time at 3 more benches at the bottom of the pit. And obviously, what we have calculated as forecast grade, we came better than that. And I will say mainly it's because of the selectivity. Once we get into the next year and the next quarters, we're going to be able to predict the grade better and make sure that we mine what we said and the grade that we said we would mine. So we're going to be closer to what we're predicting.

Okay. I understand. And then, maybe this is a question that's probably more for when the Technical Review comes out. But how do you see the impact on your mining cost by going to this more selective measure?

No, obviously, because we're going to be reducing the productivity a little bit. We're going to increase the loading and lowering costs. Also, because of the amount of PAG material that we're seeing that is more than was in the model that will increase the mining cost too because we have to construct aligned facilities to put that PAG material, the rehandle of the PAG material, the rehandle of the water. That's increasing the mining cost. Eventually, if we are able to reclassify that PAG material, we're going to see a reduction. But in the meantime, we have to be realistic and that mining costs are going to increase compared to what we said in the Technical Review last year. And that will increase our crop grade, which, at the same time, will probably reduce or convert some of our reserves into resources.

Okay. David, that's great. It sounds like there's a lot of opportunity and good luck in executing over the next 18 months.

[Operator Instructions] At this time, we have no other questions. I would like to turn the call back over to Sam Pazuki.

Thank you, operator. Just a couple of points of clarification as well. I mean part of the mining unit costs at Haile is related to moving water around and also rehandling the PAG waste. So as we get the SEIS permit and as we look at opportunities to reduce the amount of PAG material that we generate, either through the RC drill program or as David had just mentioned the reclassification of some of the yellow PAG material, that should drive some of the unit costs down from rehandling perspective. So this is some of the work that is ongoing as part of the Technical Review and to evaluate our full cost. And again, we'll come out with a new mine plan within the first half of next year. So there are no other questions. That concludes the webcast and the conference call. A replay will be available on our website later today. So on behalf of Scott and the rest of the management team, thank you for joining us today, and wishing you a pleasant rest of the day. 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.