Confidence Returns to the OceanaGold Share Price on Mine Renewal

Confidence Returns to the OceanaGold Share Price on Mine Renewal

The share price of OceanaGold Corp [ASX:OGC] looks like it has finally shifted momentum with the company announcing the renewal of its Didipio Mine in the Philippines.

We first noted a turnaround in the OGC share price last week when the miner announced an extension to the mine life of its Macraes Operations in New Zealand.

ASX OGC Share Price Chart - OceanaGold Shares

Source: Tradingview

With the extension and the newly mined renewal in the Philippines we could see some of the animosity currently surrounding the share price dissipate.

At time of writing the OGC share price is up 27.32% or 52 cents to trade at $2.42 per share.

Government to renew historic agreement

OGC announced today that the Office of the President of the Philippines has instructed the relevant government bodies to engage with OGC and the Department of Finance to finalise the renewal of the Financial or Technical Assistance Agreement (FTAA).

The Didipio Mine is held under the first ever FTAA issued by the Philippine government, granting title, exploration, and mining rights to OGC within a fixed fiscal regime.

In June 2019, the FTAA became renewable for a second 25-year term under the same terms and conditions.

The FTAA does not award OCG ownership of any mineral resources, rather, OceanaGold is essentially a contractor of the Republic of the Philippines and the mine is a national asset.

The Didipio Mine has been a significant contributor to OGC’s total gold output and with work at the site currently halted the company’s gold production has declined.

With the prolonged closure on the mine, OGC was forced to lay off 496 Didipio employees and was hit with an impairment charge of $80 million.

Temporary closure of the mine has also negatively impacted OGC earnings, cutting EBITDA by 147%.

Will we see a turnaround in 2021?

Today’s announcement is in relation to the ‘finalisation’ of the FTAA renewal, not the actual issuance.

So just keep that in mind.

There we no date specified when we could expect OGC to receive the renewal either.

Before operations were stopped at Didipio last year, OGC was expecting production of between 120,000 and 130,000 ounces of gold and 14,000–15,000 tonnes of copper.

If Didipio returns to operations within the coming months, then we could see the share price lift with the subsequent rise in gold production.

And hopefully take advantage of the current historically high gold prices.

If you want to learn more about the future of gold, then check out this exclusive interview from The Daily Reckoning Australia: ‘The New Case for Gold: An Interview with Bestselling Author and Wall Street Insider, Jim Rickards’. Click here to learn more.

Regards, 

Lachlann Tierney

For The Daily Reckoning Australia