OceanaGold Corporation (OGC) Earnings Call Transcript & Summary

Good morning and afternoon, ladies and gentlemen, and welcome to the OceanaGold 2021 Fourth Quarter Results Webcast and Conference Call. [Operator Instructions] Also note that this call is being recorded on Wednesday, February 23 at 5:30 p.m. Eastern Time. I now would like to turn the conference over to Sabina Srubiski. Please go ahead.

Thank you very much. Good evening and good morning. Welcome to OceanaGold's Full Year 2021 Results Webcast and Conference Call. I am Sabina Srubiski, Director of Investor Relations for OceanaGold. I am joined today by Scott Sullivan, Chief Operating Officer and Acting CEO; Scott McQueen, Chief Financial Officer; David Londono, Executive General Manager, Haile Operations; David Way, Executive General Manager, Philippines and New Zealand; and Sam Pazuki, Senior Vice President, Corporate Development. Before we proceed, note that 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 the call over to Scott Sullivan to walk you through the key highlights of the quarter.

Thank you, Sabina. Good evening and good morning to all. It's a pleasure to be with you today. We have a lot to cover today, so I'll get things going right away with Slide #3. Delivering consistently on our commitments underpin strategy to create long-lasting value for shareholders. Despite another year of uncertainty globally and significant changes made throughout the course of 2021 at OceanaGold, we delivered what I would consider to be a successful year. The fourth quarter of 2021 saw the return of positive free cash flow on the back of record gold production at Haile and a strong operating performance at Didipio, which recommenced production in early November after more than 2 years of being in the state of operational readiness. Having a diversified portfolio played an important part in our performance during the quarter as the New Zealand operations underperformed against expectations for much of the year operationally and faced external factors, including government restrictions related to COVID-19. Subsequent to the quarter end, we announced the completion of the Haile technical review, and we'll cover some of the details of that work later in this webcast. Turning over to Slide #4. We pre-released our production and costs in January, and those figures are reflected here. We are pleased to have achieved our consolidated production and cost guidance with Haile and Didipio both exceeding their respective production guidance. Consolidated gold production increased 20% over 2020, while our cash costs decreased 15%, and all-in sustaining costs decreased 2%. I view our 2021 performance is a step in the right direction. We will look to build on this positive momentum going forward. I will now turn over the presentation to Scott McQueen to walk you through the financial results.

Thank you, Scott, and hello, everyone. Over the next few slides, I will cover the key highlights of our 2021 financial results. As Scott just mentioned, our fourth quarter performance was driven mainly by strong quarters at both Haile and Didipio. And we're very pleased to have Didipio back operating, and we expect to continue to see the benefits that brings our portfolio as we ramp up the operation fully. Over the full year, revenue came in at just under $745 million, which was 4% shy of the company's record annual revenue, which we achieved in 2018. $745 million was also almost 50% above the previous year, a strong increase primarily driven by record production at Haile and, of course, the restart of Didipio, which included the sale of the pre-existing copper gold concentrate inventory on hand during the third quarter of the year. On the stronger revenue, full year EBITDA increased over 150% to just under $330 million. This result also reflected a 70% year-on-year increase in EBITDA margins. That's despite the Didipio idle capacity charges and cost [ imposts ] associated with COVID-19 operational interruptions, especially in New Zealand. Adjusted net earnings came in at $141 million or $0.20 per share for the year, including $0.04 per share in the fourth quarter, which compared to analyst consensus of around $0.01 per share. On an unadjusted basis, the final net result was a loss of just under $4 million. This included the previously announced noncash post-tax net impairment charge of approximately $102 million. We've included a post-tax charge of $181 million in relation to the Haile operation, largely due to the updated life of mine cost and capital assumptions per the technical study. This was partially offset by a post-tax impairment reversal of $79 million to fully restate the carrying value of Didipio. This, recognizing the renewal of the FDAA and the successful restart and ramp-up of operations across the fourth quarter. More details on the Haile technical study findings will be covered by David later in the presentation. Operating cash flow for the year increased 32% on the stronger EBITDA, but this was partially offset by material working capital movements mainly associated with the gold presales, which were closed out in July 2021. At the end of the year, we had no hedging arrangements in place. Adjusted cash flow per share after working capital movements for the year was $0.40, including $0.13 in the fourth quarter, which compared to analyst consensus of approximately $0.08. Moving on to Slide 6 and our capital expenditure for the year. Consolidated capital expenditure for 2021 increased over 2020 as planned. This included higher capitalized waste stripping plus the build-out of Haile's mining infrastructure; the continued development of the Martha Underground mine at Waihi, which commenced continuous production in mid-2021; plus the development of Golden Point Underground at Macraes, which also achieved first production in the fourth quarter of 2021. In Q4, capital expenditure decreased quarter-on-quarter, mainly due to the lower capitalized waste stripping and the delay in commencing development at the Haile Underground. This was partially offset by an increase in general operating capital and exploration costs across the New Zealand operations. Overall, our 2021 capital program followed plan in that we successfully expanded our exploration opportunities while bringing to production 2 new underground mines in New Zealand. We also have laid the foundation for a third new underground mine at Haile, which is planned to continue development in 2022. Moving on to Slide 7 and the balance sheet. For the fourth quarter, pleasingly, we moved back into a positive net cash flow, where we saw our net cash position increased $20 million. As at the end of the year, our cash balance stood at $133 million, while total available liquidity was $163 million. Net debt, inclusive of equipment leases, was approximately $238 million. We have a sound balance sheet, and we're positioned to deliver strong free cash flow over the next few years. This will allow us to pursue a balanced capital allocation plan, one that allows us to fund investment in high-margin, value-accretive growth opportunities, including the Haile Underground and WKP, Wharekirauponga, to reduce net debt and to provide distributions to shareholders. I will now turn the presentation back to Scott Sullivan to discuss our 2022 guidance and 3-year outlook that underpins those plans.

Thanks, Scott. Let's move on to Slide 9. 2 weeks ago, we were pleased to announce our 2022 guidance and 3-year outlook. We view the future of this business as exciting with growing gold and copper production and increasing free cash flow generation. We have high-margin growth projects that we're advancing while improving on our operational performance. In 2022, we expect gold production to increase between 25% to 35% over last year, while cash costs are expected to be slightly lower and all-in sustaining costs slightly higher in an increased capitalized waste stripping. The increase in cost year-over-year is a reflection of inflationary pressures and increased capitalized waste spend. Our increased gold production in 2022 is driven by Didipio, which we expect will deliver almost a full year's worth of gold and copper production at first quartile unit costs. We expect a rebound of the New Zealand operations as Martha Underground continues to ramp up, while Macraes returns to steady-state operations. These increases will help to offset a year-on-year decrease in production at Haile, which as we have previously flagged, reduced 2022 output related to the delay in the SEIS Final Record of Decision affecting access to higher-grade ore. Our capital investments this year and over the next few years is focused on opening new pits at Haile and Macraes, which is driving the higher capitalized waste stripping. Our growth investments related to the Haile Underground, continued development of Panel 2 at Didipio, ongoing development works at Golden Point Underground at Macraes and further development of Martha Underground at Waihi. We will continue to invest in drilling, particularly at Waihi, where we are focused on resource conversion and resource model de-risking at Martha Underground, and a significant increase of spend at WKP, where we're ramping up drilling activity to add even more value. Let's move on to Slide 10 and our 3-year outlook. Over the next 3 years, we are expecting production growth at a compound annual growth rate of 15% from 2021 levels. Additionally, we'll see a step change in copper production as Didipio ramps up to full production. Given the metal prices today, it's a good time to be a copper producer and having that revenue stream in the business. Looking at 2024, our gold production is expected to significantly increase by 60% to 70% from 2021 levels driven by Haile. We do have a fair bit of capital to invest over the next few years related to capitalized stripping at Haile and Macraes. Growth capital investments are related to high-value initiatives such as the Haile Underground and Waihi North exploration. With increase in production, we expect unit cost to decrease and profit margins to improve. We expect free cash flow generation to be meaningfully stronger over the next few years. This free cash flow generation positions the company well to deliver on its high-margin growth plans, make discretionary debt repayments and return capital to shareholders at the Board's discretion. This is a key point we want to emphasize to the market. OceanaGold is returning to being a high free cash flow yielding company. Of course, this is the plan we've laid out, and the onus is on us to execute and deliver on these plans. I will now turn the presentation over to David Way to briefly walk you through the Philippines and New Zealand operations. Thank you, David.

Thank you, Scott. Good day, everyone. On Slide #11, as we've heard already, it's great to have Didipio back into the portfolio and ramping up ahead of expectations. We completed all maintenance and upgrade works in the third quarter and restarted the process plant with new ore feeds in early November. In only 2 months of ramping up the operation, we produced about 15,000 ounces of gold and 1,700 tonnes of copper. A very pleasing restart of operations. Underground mining continues to ramp up ahead of schedule as we drove closer to achieving the 1.6 million tonnes per annum underground mining rate. We now expect to achieve this rate in the second quarter, and this is a major factor for why we believe we can deliver almost our annualized production potential. The process plant is currently running at its 3.5 million tonnes per annum rate and fed with the blend of lower-grade stockpiles, which has progressively been offset by the higher-grade feed from underground. We have approximately 23 million tonnes of stockpiled ore on surface, which we will continue to blend with underground ore for the duration of the mine life. The relationships with the community continue to remain strong, and we are working well with local stakeholders from Didipio and neighboring communities to advance community development projects. We also continue to work closely with government officials in COVID-19 vaccine programs as vaccination rates continue to increase, both amongst our workforce but also throughout the local communities. We look forward to recommencing the exploration program at Didipio, which is designed to test at depth extensions, allowing us to expand the mine life given the ore body at Didipio is open at depth. Moving to Slide #12. We are expecting an operational rebound in Macraes for 2022 following a challenging 2021 that ended on a high note. The positive momentum we built up in December of last year has continued into this year with better mine productivities, increasing grades and better recoveries. In 2022, Macraes is expected to produce between 140,000 and 155,000 ounces of gold at an all-in sustaining cost of $1,300 to $1,400 per ounce sold and cash costs of $800 to $900 per ounce sold. The wider production guidance range reflects uncertainty related to potential COVID-19 restrictions. Production for the year is expected to be evenly distributed quarter-on-quarter. We have smoothed out the production profile at Macraes over the next 3 years and have accelerated mining of the Frasers open pits as part of the optimized mine plan. This means we have also accelerated the capitalized waste stripping to open new ore zones that we will mine over the next 3 years. In the fourth quarter of 2021, we processed first ore from the Golden Point Underground, which was on schedule. We will continue to develop and expand Golden Point over the course of this year and next before we fully transition from Frasers Underground. Under the leadership of Mike Fischer and the team, Macraes is expected to be the steady operation it has typically been, and we will continue to seek out opportunities to grow margins and extend mine life beyond 2028. Moving on to Slide #13 and Waihi. The ramp-up of mining rates at Martha Underground continued to increase, and our guidance reflects increasing gold production. Although we fell short of our guidance range in 2021, we do expect to double production this year and achieve steady-state production of 90,000 to 100,000 ounces of gold on average per year from Martha Underground starting in 2023. For the full year 2022, production at Waihi is expected to be stronger in the second half of the year than in the first half with the fourth quarter expected to be the strongest quarter of production at a lower corresponding all-in sustaining cost. We achieved steady-state underground development rates in the first quarter of last year and have since modestly increased these rates over the course of 2021. We are looking at ways to further increase underground development rates as we bring additional stopes online. At steady state, we expect to be mining 15 to 25 sites a month depending on where we are in the mine sequence. Our ability to increase the number of stopes brought online and increase development will be enabled by the recently installed primary vent fans. We are also increasing the amount of resource definition drilling to address the continued negative reconciliation that has impacted us since the beginning of the fourth quarter of 2021. This drilling is focused on increasing our confidence in the resource model in areas that are underdrilled and to convert inferred resources to indicated. Our guidance includes only indicated resources. Preparation for the lodgment of the consent application for the Waihi North Project, inclusive of the Wharekirauponga Underground Mine, continued to progress with environmental assessments nearing completion. Over the next few months, we will continue engagement with a broader group of stakeholders as part of that consenting process. We expect to lodge our formal consenting application to both the regional and district councils, inclusive of stakeholder feedback, in the first half of 2022. The councils will review the application, invite public feedback and then refer the application to the Environment Court. After receipt, the Environment Court will oversee preparation for a hearing on the application, which we would expect to be held by mid-2023. For this year, we are expecting to increase the investment in exploration, particularly at Wharekirauponga. Last year, we managed to drill less than 5,000 meters as drilling productivity was impacted by the 2-week lockdown in August and a prolonged seasonal drought period. The drilling we completed last year at Wharekirauponga focused mainly on resource conversion of the East Graben vein, with a step-out hole testing the extension of the East Graben structure along strike to the Southwest. We extended mineralization of the East Graben vein by 20%, and it remains open in multiple directions. We are looking to permit a third drill rig to focus on extensional drilling at Wharekirauponga to further increase the value of what we believe could be the crown jewel of the OceanaGold portfolio. At Wharekirauponga, we have $10 million budgeted for exploration, a significant increase to our investment there of previous years. I will now hand over the presentation to David Londono to take you through Haile.

Thank you, David. Good evening and good morning, everyone. Moving on to Slide 14. 2021 was a very strong year at Haile with record annual gold production and the implementation of operational changes that yielded positive results, and I expect this will continue for many years to come. We have completed the Haile technical review, and I will spend some time today talking, walking you through the physicals of the study but also on additional opportunities that we're currently looking at. This year's guidance reflects the delay in the SEIS Final Record of Decision and all the associated permits. Despite this delay, we are feeling very positive about the mine plan and are focused on delivering increased value going forward. Haile's 2022 production profile is evenly weighted between the first and the second half. However, third and fourth quarter production is expected to be materially higher than the second and the third quarters. All-in sustaining cost is expected to correspond to quarterly sales volumes and be highest in the second and third quarters. Capital investments are also expected to be highest through second and third quarters. Based on the company receiving the SEIS and associated permits in the first quarter as expected, approximately $35 million to $40 million in sustaining and $30 million to $35 million in growth capital for 2022 is consistent on receiving the SEIS with the start of spend expected in the second quarter. Moving on to Slide 15. The company now expects to receive the SEIS Final Record of Decision and related permits in the first half of 2022. These permits relate to the expansion of the operating footprint to accumulate waste stockpiles, increase discharge rates at the water treatment plant as well as the development of the Haile Underground. Engagement with the U.S. Army Corps of Engineers and the South Carolina Department of Health and Environmental Control is strong and ongoing on a weekly basis. We have also worked closely with the local stakeholders, who are very supportive of what we're proposing. Although we do not see any short stoppers and the process is complete as we await the final decision, we have had to implement workarounds to accommodate waste and water management, which is a driving factor for the decreased year-on-year output and why we have to stand down -- why we have had to stand down local contractors. The delayed SEIS has also led to high cost associated with the rehandling of waste and water management. Upon receipt of the final decision on permits, we expect costs to decrease and normalize over the course of the next 18 to 24 months. Moving on to Slide 16. I will spend the next few minutes on the results of the technical review. Last year, we undertook a strategic and technical review of Haile mine with a purpose of maximizing the value of the asset. This review assessed the gold mine plan using updated operating and capital costs based on historic data, expected performance going forward and changes to our cost structure. On Slide 17, here is a look at our production and all-in sustaining cost profile through the end of the current mine life in 2034. As you can see, the production profile is variable year in, year out. However, my expectation is that the production profile will be less variable as we gain additional operational flexibility with higher-grade ore feed from the underground. The step change in production in 2024 is notable and related to operating the first full year of underground production and mining in a high-grade zone in the open pit. The underground reserves currently extend out to 2028. However, we do believe that there is a significant opportunity to increase underground resources and reserves, which will contribute to a higher overall output with lower costs at Haile. The technical report did factor in a higher crop grade, however. There were no significant changes to the existing reserves as there was an update to the geological model that was used where some inferred reserves were converted into indicated. We have optimized the mining operations with varying bench sizing and dilution factors with the addition of grade control drilling, which helped offset the forecast and lower mill and recoveries. I'll speak more to that in just a second. On Slide 18, here are the mining physicals. Life of mine, the average open pit grade is 1.58 grams per tonne, while the average underground grade is 3.7 grams per tonne. Total material mine decreases from 2021 levels over the course of the next 3 years related to the ongoing delay in the SEIS process and the change to selective mining, where we will concentrate on quality versus volume. As we improve upon this approach, as we move forward with later-stage CapEx a little better [ at Haile ], we expect mining rates to increase. On Slide 19, on the processing front, a notable change in the new mine plan relative to the previous plan is a slight reduction in mill feed rates. The reality is that we have experienced harder ore than originally expected and expect that the underground ore would be even harder to mill, affecting the mill throughput. As such, we have assumed mill feed to span at approximately 3.6 million to 3.8 million tonnes per annum. Although we are setting a realistic target to hit each year, we continue to look for opportunities to push throughput rates higher without affecting [ residence time ], which affects recoveries. Another notable difference in our new plan is the resetting of expectations with respect to gold recoveries. We previously believed we could achieve recoveries rates in the mid-80s. This is currently achievable with a higher head grade. And although the change made to the process time have yielded positive results, we believe life of mine average goal recoveries are realistically at 81%. Again, we will continue to look for opportunities to improve upon this. Moving on to Slide 20 and unit cost. The company has previously made some aggressive assumptions on what it can realistically achieve in terms of unit cost and capital. The reality is that the last few years of operations have proven to be challenging in operating this mine at a lower cost. This is related to factors external to the company but also inefficiencies that we have been progressively addressing and we continue to address going forward. Result is that we are now forecasting for unit cost based on what we believe we can achieve at a minimum. Open pit mining costs over the life of the mine are expected to average around $250 per tonne mined. We're expecting that our mining unit cost will decrease over time as we reduce cost over the next few years related to our need to rehandle waste due to the delay in the SEIS decision and some additional costs related to grade control drilling. As we increase mine utilization rates and reduce our maintenance costs, we will drive these costs lower, and these are already reflected in our assumptions. Beyond these changes, we will continue to seek out opportunities to operate more efficiently, which we will drive costs lower. I have a slide on this later. We're also expecting processing costs and site G&A costs to decrease progressively over the life of the mine. Processing costs will remain somewhat elevated over the next few years related mainly to water management. Once we have received the permits to build a larger water treatment plan, we expect to better manage our water levels after 3 years. The blast fragmentation improvements we implemented last year have led to higher throughput rates and increased mill utilization and also decreased maintenance costs, which are contributors to the higher unit costs experienced in the last few years. Going on to Slide 21. The previous estimates on capital investments were not reflective of our higher unit costs and needs to manage the amount of waste, particularly PAG or potentially acid generating waste, and managing water levels. The technical review results are now better aligned with our future capital needs. One of the main drivers for the higher capital requirements compared to the previous plan is how the operation has been conducted over the past several years. Taking a bulk tonnage approach to Haile has resulted in higher dilution and waste generation, including PAG waste. As such, we have nearly exhausted the waste storage cells. We have -- are required to build out additional storage, which is part of the SEIS decision we continue to wait for. We have some initiatives that we're looking at that are designed to reduce the amount of waste we expect to generate -- PAG waste we expect to generate. And this, in return, should decrease our future capital requirements. More on these in a few minutes. Moving on to Slide 22. We'll spend the next few slides to walk you through the opportunities that we have partially implemented or are in the process of implementing at scale. Some of these opportunities such as blast fragmentation and grade control drilling of ore zones only have been captured in the mine plan we have just released. However, there is further upside on these initiatives and other initiatives that were not captured in the mine plan. Mining operations were previously driven by volume. With the Haile ore body being geometrically complex, we have changed the focus to ensure quality of the ore delivered to the process plant. We'll be implementing an active drilling program for grade control and in the years to come for PAG waste specification. For this year, we plan on drilling 25,000 meters with RC rigs and then ramp up this drilling up to 50,000 meters a year. We have one of our main loading equipment in a backward configuration that is more suitable to mine more selectively. These efforts will be designed to reduce ore dilution and optimize PAG waste that were required to deposit in especially lined waste areas. We have elected to continue mining 10-meter benches in waste areas and 5- to 10-meter benches in areas that are on the higher levels of the pit. And as we push down on the open pits, we've reduced the sizing in ore, transitioning from 5-meter benches to 3.2-meter benches. As a result of these changes, we are expecting a significant reduction in dilution at much higher grade, both captured in the new mine plan to some extent with some upside potential. These changes should result in less waste that is acid generator -- generating, which will decrease certain capital needs. This benefit has not been captured in this current plan. Moving on to Slide 23. We have implemented changes to blasting of ore zones in the open pit to push throughput rates at the process plant, minimize block chutes in the primary crusher, decrease plant maintenance costs and increase mill utilization rates. We have realized the benefits of changing our blasting approach, and this have been factored in the mining plan. We will continue to further optimize blast fragmentation in ore zones to further drive additional benefits to what I just outlined. But we'll also increase mining utilization rates. One area that we have not yet implemented is optimizing blasting in waste zones, which is something that we will focus on next. In changing the blast patterns in waste zones, we expect to achieve better mine productivity as the shovels will deliver more efficiency digging and loading and will allow us to reduce haul cycles through better mine roads and pit roads. Moving on to Slide 24. I touched on this already in that mine selectivity through grade control drilling and smarter bench sizing should reduce the amount of waste and PAG waste generation. Over and on top of this, we have gathered a significant amount of data over the past few years on the way that we generate and the potential to generate acid rock drainage. We have found that there is a considerable amount of material that have been labeled as PAG waste that have a very low probability of turning acidic. Once we have completed the SEIS program, we intend to engage the regulators to show the completion of our data with a request to modify the current classification of the RC generating waste. Should we be successful and the regulator grant us this modification, then this could result in a significant reduction of PAG waste and future capital needs. Going on to Slide 25. I covered some of the initiatives underway or already implemented to drive improvements and efficiencies with processing, and these benefits have already been captured in the mine plan. Over and on top of these benefits, we are working on how we can further de-bottleneck the process plant without any major capital investments. The equipment is there, and we are focused on making it all work. This includes optimizing the kinetics of the plant to drive gold recoveries higher and how we can make slight tweaks to the flow sheet, further improvements to blasting resulting in improvement in throughput rates and addressing some of the harder ore zones that limit the SAG mill. Going on to Slide 26. The future of Haile is underground. Over the course of the past year, we have drilled a few underground targets that is shown on this slide. While we wait for the SEIS final decision and the permit that allows us to build the underground, we have proceeded with development of surface infrastructure, which we're permitted to do in anticipation of receiving the permits. The Horseshoe Underground is the first deposit we'll mine and a major driver of future production increases. We continue to see potential for extensions to Horseshoe, and recent drilling has confirmed this. Once we get underground, we will more aggressively and extensively drill out Horseshoe as well as the 1 kilometer corridor between Horseshoe and Palomino, testing both deposits and testing targets in between. As you can see, there is a lot of work to do ahead. However, I'm feeling very confident to deliver on the mine plan we have just released, [ improving ] additional operating efficiencies and cost reductions and drive additional value, which we believe exists through discoveries of the underground. I will now turn the presentation back to Scott Sullivan.

Thank you, David and team, for your overview. I'll wrap up the webcast on Slide 27. Our team firmly believes the future of OceanaGold is very bright. We've implemented many initiatives over the past year to right the ship and focus the company to regain its favorable position in the industry. And we will continue to restructure and build capability in the business moving forward. We have a lot more work ahead of us. However, we have the talent and enthusiasm to do it, including our new President and CEO, Gerard Bond, who starts in just over a month. We now have more realistic mine plans that are designed to allow us to deliver on our commitments. We have high-margin growth opportunities that we're investing in and advancing and several operating initiatives designed to drive additional value. As I mentioned earlier, we will be generating positive free cash flows, which are expected to grow over the next few years. This is a great position to be in, and we are focused on delivering it. I'll now turn the call back over to Sabina.

Thanks so much, Scott. I'm now going to turn the call -- turn over the logistics of the Q&A session to the operator. So we can please go ahead with the Q&A.

[Operator Instructions] And your first question will be from Adam Baker at Global Mining Research.

I appreciate the updated Haile mine plan that has more realistic unit cost and realistic capital guidance. Just one on Horseshoe Underground. Other than the permits, what else are you waiting for on the underground for this? And just checking to see, are you still planning to mine that deposit from the bottom up? Or has this changed?

So we're only waiting for the permits. We have all the equipment ordered and we have the contractor already set. And once we start, we're going to develop [ a year ]. That plan is to mine from the bottom up.

Sure. And just one on Didipio. So you got 23 million tonnes of stockpiles there. Just wondering, are you able to access the high-grade material first? Or is that all just mixed together in one large stockpile?

David Way, you're best positioned to answer that one, I think.

Yes. Yes. Thanks. It has been blocked out, and it is, in general, being able to preference medium grade over the lower grade. And obviously, that's what we do. But it was built as the open pit was mined. So it is pretty much homogenous. Yes.

Yes. Sure. Makes sense. And then at Waihi, just wondering if you could walk us through the issues with the resource model there and the discrepancies that you're seeing between the mine grades and the resource model. Just in the early stopes that you've been seeing with the grades, are you seeing these issues come through the virgin stopes? Or are you seeing the grade issues more within the stopes around the old workings?

I might flip to Craig on that one. Craig Feebrey?

Thanks, David. Thanks, Adam, for the question. The variability really boils down to geological complexity and grade variability. We're seeing it both in the second order structures, and these include unmined veins. And it's still early days. We're still trying to increase throughput and to understand the variability in the different parts of the mine. But to your question, we're seeing it in different places, and it's really the geological complexity in second order veins and short-range variability.

It sounds like a bit more -- yes. It seems like a bit more resource definition drilling needed to just put up the model, I guess.

[Operator Instructions] And your next question will be from Mike Parkin at National Bank.

Just a quick question. On the Haile SEIS permit, I noticed you're guiding to receive it in the first half of this year. But back on February 9, you're indicating just it's expected in the first quarter. Is there any signs of slippage on that, which is why you kind of extended the window of when you expect it?

So this is David Londono. So what we've seen is that we have all the information that the government, the SEIS requires. They're analyzing, reviewing everything. They made a couple of comments that we're responding right now. But we don't see a slippage further than the first half.

Okay. And does that additional quarter, if it came in Q2, does that give you any kind of hiccups in the first half relative to what you've guided to?

No. 2022 mine plan is -- doesn't have any impact. And we've been managing water much better and also now. So we don't see any hiccups into the 2023 mine plan.

[Operator Instructions]

Yes. This is Sabina here. And I see that we have a question. Can the ASIC be further reduced at Haile? I'm going to let David Londono answer that.

So the question, can we...

Can we further reduce the ASIC at Haile?

We're looking for more opportunities to reduce -- particularly improving our productivities in moving waste. We have a high stripping ratio on sites. So we need to become much better at moving our waste, and we're going to achieve that by improving the blast fragmentation. And by improving that, we can, at some point in time, even park equipment, which will reduce fuel consumption, maintenance component replacement, et cetera. So that's one way. And then also, we're looking into how we sign up contracts, reducing our contractor costs, reducing our contractors on site that we use and making sure that we improve our maintenance planning and that we become better. Right now, we need to turn around our maintenance practices, and that will definitely reduce our costs, which obviously will improve our all-in sustaining cost.

All right. Thank you very much, David. We got another question in the queue. What gets you excited about, and I'm going to apologize, I can't quite pronounce it yet, the WKP prospect? Craig or David, please answer. Craig?

Yes. Look, obviously, from a value driver for the company, it's key, and for New Zealand. And so with the addition of jobs, longer life, socioeconomic benefits, the offsets that can be done from environmental biodiversity, water perspective, it's going to be a fantastic opportunity for not only the company but the country to demonstrate how much value can be brought about by responsible mining. And obviously, it's one of the, at this stage, most positively endowed ore deposits that has been discovered in recent times. So very excited. Craig, I don't know if you want to add to that?

Just on the geology side, Dave, I think it's worth mentioning, and probably the audience is familiar with some of the plans we've put in previous press releases. But there are 3 main structures that strike -- or the EG veins now striking over a kilometer. It has extremely good width and very good grades, commonly just called bonanza vein. And we've been focused on just one of the shoots within the EG vein and the hanging and footwall splay. There's still a lot more to explore within the EG vein. And then we also have economic widths and grades in both T-Stream and the Western vein. So all things considered, there's still a lot of exploration to go there, and we're really only at the beginning of defining the true value. Thanks, Sabina.

You have commented that the future of Haile is underground. What gets you excited about this opportunity? Craig or David, please answer.

I'll let Craig answer that question.

Thanks again, Sabina. So with the Haile Underground, when we bought the opportunity at Haile, we did realize there were underground opportunities. And Horseshoe was the first one that we thought was the most compelling. Obviously, '16, 2017, we did a drill program to show that Horseshoe is economic, and we still have ways to go. There's still a significant portion of inferred to convert in the lower portions of Horseshoe. Since then, we've defined several other targets, including Palomino, the Horseshoe extension and some other early-stage targets, Aquarius and Pisces. And several of those have drill holes in them already. 2021, we spent drilling and converting the upper portion of Palomino. And in 2022, the aim is to continue that to get all of Palomino into indicated. So currently, we have a pipeline of projects which we feel will continue to create value at Haile in the underground.

And we've got one more. We've been asked if we can please clarify the opportunities that we've laid out -- clarify if the opportunities we've laid out at Haile are opportunities above and beyond what was included in the work we already released in the study. David Londono, please.

Yes. There are additional opportunities like I mentioned, improving blasting on the waste material. And the big one for us is the reduction of PAG waste and how do we achieve that reduction. We achieved that reduction in 2 different ways. The first one is being more selective and better sampling on the waste material. And if we can decide that is green material, then we can put it in closer waste dumps. And then we'll reduce the amount of, let's say, potentially acid generating waste that we have to move further to -- more further areas. But at the same time, if we achieve what we expect to achieve with the government that we change the reclassification of some of that waste into -- from yellow to green, then we definitely won't need additional PAG waste storage areas in the future.

Thank you so much, David. Operator, are there any more questions in the queue?

[Operator Instructions] And currently, we have no questions registered.

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

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