00:00Also, Matt, Oceana Gold rang the bell on the New York Stock Exchange earlier this week, a move aimed, listing
00:05there, at widening its investor base and boosting its liquidity beyond Toronto, where it was listed before.
00:10And it also comes as the gold story shifts. North American production is under pressure while global players gain ground.
00:18Joining us now is Jared Bond, CEO of Oceana Gold.
00:20And I feel like this is especially interesting to bring up, this idea that there's less coming out of the
00:26United States and it's happening globally because you have a huge presence in South Carolina.
00:31How is that operation going? How does it compare to what you're seeing globally?
00:35Well, look, it's our largest producer. This year it's going to produce 45 percent of our gold production and it's
00:41growing.
00:41I don't know what's going on in the rest of the USA, but this year the Hale Gold mine in
00:45South Carolina is going to produce 35 percent more gold at a 25 percent lower cost than it did last
00:51year.
00:52So its production guidance is sitting around $1,550 per ounce. Gold's there at $4,600 an ounce.
01:00We're going to produce 245,000 ounces. That's a really meaningful producer of gold.
01:05It's massive. And obviously the price of gold has been accelerating to a level that's eye-popping.
01:14What are the cost inputs there? Because I gather that energy is an extremely high cost or a high part
01:20of the cost of producing gold.
01:22Well, across our business, and Hale's no different, energy is about 16 percent of our total cost.
01:29So 8 percent is around electricity. 8 percent is diesel. We hedge our diesel 12 months out in advance for
01:37Hale Gold mine for about 80 percent of it.
01:39So we're not suffering any material impact on our cost base as a result of the increase in oil prices.
01:44What difference has just the pure volatility in gold prices meant for you?
01:49Well, it's meant increasing margins, right? This time last year, gold was $3,200 an ounce.
01:54Today, it's $4,700 an ounce. And we've been able to take that high, strong gold price straight to the
02:01bottom line.
02:02Last year, we had record financial performance. We had a return on capital of 15 percent.
02:07We had record profitability, record free cash flow.
02:11This year, we've increased our dividend threefold. We've increased our share buyback by 100 percent.
02:17And we're still able to add cash to the balance sheet.
02:20So in this unicorn situation, we've been able to sustain the business, grow the business, increase exploration,
02:26double the amount of direct capital that we return to shareholders, and still build cash.
02:31It's a fabulous time to be in the gold space, and we're uniquely placed.
02:35And, I mean, you've been rewarded for it. The stock has been on fire, as I noted during the commercial
02:41when we were talking.
02:42I see it up 650 percent over the past five years. That's the total return.
02:48Do you, when you see gold, the price of the commodity, go to $5,000, do you hedge that as
02:55well by selling future of what you get out of the ground in the future?
03:00Some gold producers do. We don't.
03:02Our belief is that our investors want that exposure to the gold price.
03:06Our EBITDA margins are in the order of 60 percent, so you don't need to, we don't need to protect
03:12ourselves.
03:13We have no balance, we have no debt. We have half a billion dollars of cash in the bank.
03:18And so we see no need to hedge gold price. Our shareholders want that exposure.
03:23There had been some very strange dislocations in gold markets, especially when tariffs were announced between European and U.S.,
03:31where you'd get planes loaded with gold coming to the United States. There was this real frenzy around it.
03:37Do any of those dislocations still exist in the market, or is it sort of a more normal operating environment
03:41now?
03:42Yeah, look, there has been some movements, and a lot of central banks around the world have sought to have
03:47their gold repatriated
03:48and being located in country for those reasons. It doesn't really move the gold market aside.
03:53That's the location of where the gold is stored. It doesn't alter the price.
03:57What has happened after the Iran conflict fled was that some central banks around the world did liquidate their gold
04:03positions.
04:04It's very liquid. That's one of its great attractions to help support their currencies, but that's stabilized now too.
04:09Does that not, though, make gold that's already here more valuable than gold that's in other places?
04:17It's a global market. It's also a very liquid market. I think where it's stored doesn't alter the price of
04:23gold.
04:23So you had mentioned that you're going to bring operating costs down by about a quarter. What are those costs?
04:28Where are you able to find that extra margin from?
04:30Yeah, I was talking about our unit costs, and as I said at Hale, we're increasing our production there by
04:3535%, and we absorb fixed costs.
04:37And again, the gold price is now, this year, 30% higher than it was last year, and last year
04:43was a record financial year.
04:44So we have this unique circumstance of 30% higher gold price, lower unit costs, higher volumes. It's a great
04:52cocktail.
04:52Can you bring out more gains using artificial intelligence? Or in discovery, can you use artificial intelligence to find new
05:02hails?
05:04Our industry is very complex, and there's a lot of data, and we are working in parts per million.
05:10So the short answer is yes. We use it for exploration. There's a lot of data out there, and if
05:17we can use AI to help us target the drill rigs, yes.
05:20The biggest gains that we see are in the process plant, where, again, you're taking grams per tonne material through
05:27a complex chemical process.
05:29And if we can fine-tune the knobs using AI to optimize that flow sheet and that flow rate, we
05:34think we can get better yields.
05:36And also in maintenance. Maintenance is one of our largest expenses, and if we can use AI to predict when
05:42equipment needs to be taken down for repair, that's also a source of future value.
05:46What do you think about the role of gold for an investor? I mean, you're obviously focused on finding it,
05:53bringing it out of the ground.
05:54But you must contemplate, quite often, I imagine, whether it's an inflation hedge, why we would see it, for example,
06:03drop in a time of war rather than rise in that kind of uncertainty.
06:07It's going to replace the dollar for all central banks.
06:10Look, it's got a very broad purpose. I mean, 50% of gold over many decades now has been bought
06:16by Indian and Chinese customers.
06:19Is it jewelry? Is it store of value? Is it wealth protection?
06:23Central banks have been very large buyers since 2022, post the invasion of Ukraine.
06:29I believe global central banks now own more gold than treasuries.
06:33Yeah, very liquid. And it's very liquid as well.
06:35The ratio of trading of that gold to the underlying stock of gold is very liquid.
06:41And that makes it one of the attractions.
06:43Yeah, it's been a wonderful thing for people to have had in their investment portfolios, whether gold or gold equities.
06:50But as we were talking before we started the show, gold equities, and our gold equity in particular, has performed
06:56far better than holding gold.
06:57You get much more leverage to the gold price by owning a gold producer.
07:02Right, the gold price in five years is up 150%, and as we said, your stock price is up 650%.
07:07Correct.
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