Freaky takes a deep dive into the Gold Mining industry by looking at OceanaGold, that trades under OGC on the TSX. Freaky discloses, at the time of publishing this video, he does have an active position in OceanaGold. In fact, this position is expressively shown in this video. However, he may buy or sell into this position at any time after publishing.
#OGC #FTAA #goldup50minerdown50
Note AISC = All in Sustaining Cost; and is a non-GAAP measure used multiple times throughout the video. The lower the AISC the better profitability of the mine (all else equal).
OceanaGold is a mid sized producer that was averaging around 500,000 ounces prior to the loss of a critical mine in the Philippines. Freaky has a history with this company, as the mine was pulled almost immediately after he bought it which sent the share price tumbling... making the company not participate in the gold price appreciation the rest of the industry has (as gold ran up from 1,250 to 2,100 and now is sitting around 1,800 at the time of writing).
The company has been trying to get the mine back over the past years and as of a July 14th 2021 news release it appears to finally be onside with the government again.
When the mine was pulled the company took action overtime to shore up cash by issuing shares and slightly elevating the debt on the balance sheet. Capex has recently increased in 2020 and 2021 as they work on expanding their other existing mines (both in US & in New Zealand). Therefore these investments will also start yielding more production in the 2023-2024 years at a better AISC (while growth Capex decreases relative to today's elevation). These other mines are currently over 1k in AISC (not amazing) which makes the recent Didipio announcement very interesting... given that mine has historically had a very attractive AISC (~700 or better).
The share price appears unreactive to the news, despite getting a superiorly economic mine which represents ~30% of production and perhaps 30-40% of cash flow back online. This could mean the market does not yet believe production will result from this news... (perhaps local road blocks could still persist despite the new 25 year renegotiation with the government).
Ultimately the investment thesis relies on actually getting the mine up and running again... and currently it is projected to have a timeline of 12 months to get it running again. Time will tell with this one.... but a 3B company (when gold was at 1250) is now worth only 1.8B (when gold is at 1800)... so its likely a risk we are getting paid to take at this price point.
🚧DISCLAIMER🚧
I am not a CPA, attorney, insurance, contractor, lender, or financial advisor. The content in these videos shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other and may be outdated or inaccurate; it is your responsibility to verify all information yourself. This is a YouTube video for entertainment purposes ONLY. IF stocks or companies are mentioned, Freaky MAY have an ownership interest in them -- DO NOT make buying or selling decisions based on Freaky's videos. If you need advice, please contact a qualified CPA, attorney, insurance agent, contractor/electrician/engineer/etc. financial advisor, or the appropriate professional for the subject you would like help with.
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