2023-08-08 16:04:19 ET
Summary
- OceanaGold Corporation reported strong second-quarter earnings with record revenue of $301.0 million.
- The company is on track to meet its full-year production, cost, and capital guidance for 2023.
- I recommend buying OceanaGold stock between $2.06 and $2, with lower support at $1.96.
Introduction
The Melbourne, Australia-based OceanaGold Corporation ( OTCPK: OCANF ) reported its second-quarter 2023 earnings results on August 1, 2023.
Note: This article updates my article published on January 11, 2023.
1 - 2Q23 Results Snapshot
OceanaGold posted a second-quarter gold production of 130,055 Au Oz and 3,400 Tonnes of copper, generating a record revenue of $301.0 million .
OceanaGold is on track to meet full-year 2023 consolidated production, cost, and capital guidance.
The net Income was $68.6 million compared to $19.4 million in 2Q22. The operating cash flow was $161.7 million in 2Q23, up significantly from $79.7 million in 2Q22.
OCANF Map Assets Presentation August (OCANF Presentation)
2 - Investment Thesis
OceanaGold Corporation's performance this quarter was excellent. As expected, consolidated production increased to 130,055 Au ounces, and the company sold 139,071 Au ounces.
The gold price for gold this quarter was at a record high of $1,967 per ounce, which helped significantly the company.
OceanaGold is a good miner with solid assets well spread worldwide and solid reserves of 5.20 Au Moz, 7.4 Ag Moz, and 0.15 Cu MT.
OCANF Reserves 2022 (OCANF Presentation)
However, the stock will move in correlation with the gold price mainly.
Also, the Haile Horseshoe underground project is advancing.
OCANF Haile Expansion (OCANF Presentation)
The only issue remaining is the price of gold. With the FED indicating a possible increase of 25 points shortly, the gold price will struggle to stay above $1,900 per ounce in 2023. However, I see a better outlook for gold in H1 2024.
Thus, it is crucial to trade LIFO, a part of your long-term position (a minimum of 40%-50% is suggested). By taking regular profits off using LIFO and buying back on weaknesses using technical analysis, you can keep a core position for a more substantial gain.
3 - Stock performance
OceanaGold outperformed the VanEck Vectors Gold Miners ETF (GDX) on a one-year basis. The stock is now up 14% year-over-year.
OceanaGold - Financial Historical Snapshot until 2Q23 - The Raw Numbers
OceanaGold | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 |
Total Revenues in $ Million | 229.4 | 213.9 | 255.7 | 243.9 | 301.0 |
Net Income in $ Million | 19.4 | -6.4 | 41.0 | 38.9 | 68.6 |
EBITDA from company $ Million | 73.6 | 40.4 | 110.0 | 100.3 | 152.9 |
EPS diluted in $/share | 0.03 | -0.01 | 0.05 | 0.05 | 0.09 |
Operating Cash Flow in $ Million | 79.7 | 45.0 | 100.2 | 65.2 | 161.7 |
Capital Expenditure in $ Million | 63.7 | 55.5 | 90.4 | 81.6 | 94.5 |
Free Cash Flow in $ Million | 16.0 | -10.5 | 9.8 | -16.4 | 67.2 |
Total Cash $ Million | 150.2 | 130.2 | 83.2 | 58.0 | 114.5 |
Long-term debt In $ Million | 204.4 | 204.2 | 153.9 | 153.6 | 153.4 |
Shares outstanding (diluted) in Million | 719.7 | 718.7 | 716.6 | 714.8 | 723.7 |
Producing assets | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 |
Gold production in K Au Oz | 112.4 | 105.0 | 120.9 | 118.1 | 130.1 |
Gold production sold | 109.8 | 111.4 | 118.7 | 112.1 | 139.1 |
Gold price realized | 1,856 | 1,699 | 3.5 | 3.5 | 3.4 |
AISC $/oz | 1,430 | 1,554 | 1,602 | 1,567 | 1,318 |
Mines | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 |
Haile | 38.0 | 36.5 | 41.5 | 48.1 | 43.6 |
Macraes | 36.9 | 29.4 | 29.1 | 33.0 | 32.2 |
Waihi | 8.2 | 13.7 | 10.5 | 10.3 | 14.8 |
Didipio | 29.3 | 25.4 | 39.8 | 26.7 | 39.5 |
Data Source: Company release .
Gold Production And Balance Sheet Details
1 - Revenues were $301.0 million in 2Q23
OCANF Quarterly Revenue History (Fun Trading)
OceanaGold reported record second-quarter revenue of $301.0 million with a net income of $68.6 million or $0.09 per diluted share. EBITDA for the quarter was $152.9 million, well above the $73.6 million made last year.
CEO Gerard Bond said in the conference call:
I am pleased to say that we delivered a strong second quarter, producing just over 130,000 ounces of gold and 3,400 tonnes of copper at an all-in sustaining cost of $1,318 per ounce. This resulted in strong free cash flow generation.
2 - Free cash flow was $67.2 million in 2Q23
OCANF Quarterly Free Cash Flow History (Fun Trading)
Trailing 12-month free cash flow was $50.1 million , with $67.2 million for the second quarter of 2023.
3 - Gold production details. Total production was 130,055 Au Oz and 3,400 Tons Cu in 2Q23. (The company sold 139,071 Au Oz).
The consolidated second-quarter gold production was 130,055 ounces and 3,400 tonnes of copper , at an AISC of $1,318 per ounce on 119,071 ounces of gold sales and 3,500 tonnes of Copper.
Gold production increased by 10% compared to the previous quarter and a 16% increase compared to the second quarter of 2022. (see chart below)
OCANF Quarterly Gold Production History (Fun Trading)
- Haile produced 43,567 ounces of gold in the second quarter, a 9% decline compared to the previous quarter. The sequential drop was due to a lower average feed grade, partially offset by higher total mill feed.
- This quarter, Didipio produced 32,207 Au ounces of gold and 3,400 tonnes of copper.
- Macraes produced 39,494 ounces of gold in the second quarter, a 48% increase compared to the previous quarter.
- Waihi produced 14,787 ounces of gold for the second quarter, a 44% increase compared to the previous quarter. The higher quarter-on-quarter production was driven by a 21% increase in ore mined and a 23% increase in feed grade as mining productivity improved following the significant rainfall-driven impacts seen in the first quarter. In the conference call:
From a production perspective, both of the New Zealand operations rebounded strongly in the second quarter. The heavy rainfall impacting Waihi in the first quarter subsided, allowing access back into the high-grade stopes at Martha Underground.
OCANF Quarterly Production per Mine History (Fun Trading)
The AISC jumped significantly this quarter to $1,318 per ounce compared to $1,430 per ounce a year ago.
OCANF Quarterly Gold Price and AISC History (Fun Trading)
4 - Debt and liquidity
OCANF Quarterly Cash versus Debt History (Fun Trading)
The Cash and Cash equivalent was $114.5 million in 2Q23. LT debt is $153.4 million in a drawn revolver facility. At the end of the second quarter, Net Debt (including equipment leases) was $136.3 million , and a satisfactory leverage ratio of 0.34x. The Company had immediately available liquidity of $215 million.
As at June 30, 2023, the Company's available revolving credit facilities remained at $250 million, with $100 million undrawn. The Company had immediately available liquidity of $215 million including $115 million in cash.
The Company's Net Debt position, inclusive of equipment leases, decreased to $136.3 million from $191.1 million in the previous quarter. The Company's leverage ratio was at 0.34 times as of June 30, 2023 (press release)
5 - Full-year 2022 guidance unchanged
Full-year 2023 production guidance is 460K oz to 510K oz gold ounces at an AISC of $1,425 to $1,525 per ounce sold. CapEx for 2023 is expected to be $240 million from $285 million. AISC is significantly up compared to 2022.
OCANF 2023 Guidance (OCANF Presentation)
Technical Analysis and Commentary
OCANF TA Chart Short-Term (Fun Trading StockCharts)
OCANF forms an ascending triangle pattern with resistance at $2.18 and support at $2.04.
The ascending triangle is a bullish candlestick chart pattern that occurs in a mid-trend and signals a likely continuation of the overall trend. It's one of the most common chart patterns as it's quite easy to form - consisting of two simple trend lines. The price action temporarily pauses the uptrend as buyers are consolidating. This pause is marked with higher lows pushing for a breakout to the upside, which then activates the pattern.
The short-term trading strategy is to trade LIFO about 45-55% of your position and keep a core long-term amount for a much higher payday. I suggest selling between $2.17 and $2.22 , possibly higher resistance at $2.33. I recommend buying OCANF between $2.06 and $2, with lower support at $1.96.
OCANF 1-Year Chart Gold and Copper Price (Fun Trading StockCharts)
Watch the gold price like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
For further details see:
OceanaGold Q2: An Impressive Quarter