Gold Charmer and Resource Tenants; Quarterly Highlights For OGC, WAF, and NCZ

  • Feb 03, 2020 AEDT
  • Team Kalkine
Gold Charmer and Resource Tenants; Quarterly Highlights For OGC, WAF, and NCZ

Gold prices are knocking the heaven doors with prices trading at record highs on the domestic front, which is surely benefitting the ASX gold mining companies, and while gold prices are further forecasted to witness some strong trend ahead, ASX gold mining companies such as OceanaGold Corporation (ASX: OGC) and West African Resources Limited (ASX: WAF) are developing assets and inching up production to take the price advantage and build strong cash flows from operational activities.

Also Read: Equity Gains Cap Gold Shine; Market Apprehensive Over Risky Assets

OceanaGold Corporation (ASX OGC)

  • Operational Performance

OGC is a dual-listed (Canadian exchange-listed and Australian exchange-listed) gold mining company with business across the United States, Philippines, and New Zealand.

The company recently presented an unaudited full year (2019) and December 2019 quarter production and costs performance to stakeholders.

The group produced 108.2k ounces of gold during the quarter, which remained in line and slightly up against the previous quarter production of 107.5k ounces. However, the gold sales surged significantly by ~13.79 per cent to stand at 107.3k ounces during the December 2019 quarter.

On a quarterly basis, the company realised a slightly lower average price of USD 1,404 per ounce against the previous quarter realised price of USD 1,414 per ounce.

On the production counter, OGC mined 3,306k tonnes of ore, which remained up by 60.71 per cent against the previous quarter; however, processed 19 per cent lower quantity against the previous quarter.

The gold grades and recovery rate both marked improvement of 18.65 per cent and 4.85 per cent, respectively against the previous quarter.

The cash costs declined for the December 2019 quarter to stand at USD 757 per ounce, down by ~8.57 per cent against the previous quarter. The all-in sustaining cost (or AISC) also plunged by USD 980 per ounce, down by ~ 12.65 per cent against the previous quarter.

The same metrics on a yearly basis are as depicted below:

(Source: Company’s Report)

OGC has witnessed strong growth in the production at Haile gold prospect, which produced 46,420 ounces of gold during the quarter, which remained 26 per cent up against the previous quarter. The gold prospect also produced 11 per cent higher gold in FY19 against the previous financial year (pcp) amid higher mill feed, which indemnified the lower average grade utilised at the prospect.

In a nutshell, OGC managed to increase the production in FY19; however, both the cash cost and the all-in sustaining cost increase in FY19.

On 3 February 2020, the stock last traded at $3.060, unchanged from its previous close on ASX.

West African Resources Limited (ASX: WAF)

WAF is relatively a new entrant in the gold mining industry with two flagship gold prospects, namely, Sanbrado Gold Project and Burkina Faso, respectively.

  • Development at Sanbrado Gold Project

The construction and development activities at the prospect are on schedule and budget, and WAF completed the mechanical installation of SAG and ball mills in December 2019. About 98 per cent of structural and mechanical equipment was installed on-site, and the company managed to complete 35 per cent of the pipework and electrical installation during the quarter.

WAF also completed an HDPE lined 2 million cubic metre water storage facility in December along with earthworks for the tailings storage facility. In January 2020, the installation of the HDPE liner for the TSF was completed, and the under drainage pipework is currently going on.

By December 2019, the overall project was 90 per cent completed, and commissioning activities would start in Q1 2020.

  • Progress Across Open Pit

The mining contractor of WAF- African Mining Services mobilised a mining fleet of seven 777 caterpillar trucks along with 150t excavators during the December 2019 quarter. WAF started the open-pit mining at the M5 South – Stage 1 pit, and the total production for the period stood at 81,550 tonnes with 9,573 tonnes of low-grade ores.

WAF utilised the waste material to expand the starter run-of-mine pad and targeted the lower grades to manage a buffer layer on the run-of-mine pad prior to stockpiling the higher-grade ore.

On the underground mining counter, the company achieved an overall development of 800m with the main decline of 335m and completion of the vent decline. As on 31 December 2019, the decline was 153m below surface level while total development was 1,390m.

The first development ore is expected and scheduled for March 2020, and first stoping ore is anticipated and scheduled for September 2020 quarter.

  • Corporate Financial Highlights

During the December 2019 quarter, the total project expenditure stood at $62.5 million, with $1.2 million of administration costs. As on 31 December 2019, the cash at bank stood at $83.6 million with a drawn USD 175 million from USD 200 million of Taurus finance facility.

  • Future Plans

The company now plans to complete all structural, mechanical and piping installation and all electrical and instrumentation installation by March 2020 quarter.

Also, WAF intends to start the plant commissioning, ramp up open-pit mining, continue the development of the underground decline, start underground ore development, and deep drilling at M1 South during the March 2020 quarter.

The stock last traded flat at $0.475 on 3 February 2020.

While gold mining companies are taking a staggering leap in the wake of record highs gold prices, many resource players on ASX such as New Century Resources Limited (ASX: NCZ) are ramping up the production capacity.

New Century Resources Limited (ASX: NCZ)

  • Operational Performance

During FY20, the company continued to execute its planned ramp-up to 12 million tonnes per annum, and on a quarterly basis, zinc production surged up by 7 per cent to stand at 28,123 tonnes. While the production surged up by 7 per cent on the quarterly basis, the C1 or the cash cost fell by 3 per cent against the previous quarter to stand at USD 0.96 per pound; however, the treatment charges surged up substantially and accounted for USD 0.5 per pound in the cash cost of USD 0.96 per pound.

The zinc recovery rate improved and ranged between 50 to 54 per cent during the quarter, post the commissioning of the scavenger circuit. On a quarterly basis, the average recovery improved by 2 per cent to stand at 49 per cent in December 2019 quarter.

The mining rate also improved during the quarter to stand at an average of 8.3 million tonnes per annum, and the completion of equipment refurbishment requirements for the ramp-up to 12 million tonnes per annum is now pending with a final rougher circuit upgrade planned for February 2020.

The throughput expansion to 12 million tonnes per annum is targeted for FY20, which would allow the company to increase the zinc metal production by ~ 35 per cent from the current rate of ~ 8.9 million tonnes per annum.

  • Cash Performance Lower Amid Higher TCs

During the December 2019 quarter, receipts from customer decline by 7 per cent to stand at $42.2 million despite higher production amid an increase in treatment charges (or TCs) and an adjustment in final invoices from QP settlements of historical shipments.

However, the smelting capacity in China is anticipated by the NCZ to decline ahead with a decline in TCs as well, which could further boost the receipts from customers ahead.

  • Shipping and Sales

The shipping rates remained steady during the quarter as the company managed to sell all of its production. Also, the sales advance out more than a quarter, and NCZ has completed 25 shipments to 10 different smelters across various geographical regions such as China, Europe, and Australia.

The stock last traded at $0.190, plunging down by 13.636 per cent against its previous close.


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