Morning and afternoon, ladies and gentlemen, and welcome to the OceanaGold 2023 Q1 Result webcast and Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. Also note that this call is being recorded on Wednesday, May 3rd, 2023 at 10:00 A.M. Eastern Time. I would like to turn the conference over to Rebecca Harris. Please go ahead.
Thank you, operator. Good morning and welcome to OceanaGold's Q1 2023 Results Webcast and Conference Call. I'm Rebecca Harris, Director of Investor Relations. We are joined today by Gerard Bond, OceanaGold's President and CEO, Scott McQueen, Chief Financial Officer, David Londoño, Chief Operating Officer, Americas, and Peter Sharpe, Chief Operating Officer, Asia Pacific. Also present is Craig Feebray, Chief Exploration Officer, and Brian Martin, Senior Vice President, Business Development and Investor Relations. The presentation that we will be referencing during the conference call is available through the webcast and on our website. I would also like to remind everyone that our presentation will be followed by a Q&A session.
As we will be making forward-looking statements during the call, please refer to the cautionary notes included in the presentation, news release, and MD&A, as well as the risk factors set out in our Annual Information Form. All dollar amounts discussed in this conference call are in US dollars, unless otherwise noted. I will now turn the call over to Gerard Bond for opening remarks.
Thank you, Rebecca, and welcome to OceanaGold. It's great to have you and your experience on the team. Good morning, everyone. Thank you for joining us. We had a solid Q1 in all respects. Our results are in line with guidance, and we remain on track to deliver our full year 2023 production, capital, and cost guidance. I'll begin with safety, where I'm delighted to say that in the Q1 we achieved another company record. Our total recordable injury frequency rate of 1.9 per million hours worked on a 12-month rolling average basis was the lowest ever for the company and a decrease from the 2.3 reported for 2022.
We may not be able to sustain such low injury rates every quarter given the small number of injuries it would take to cause an increase, but you can be sure we remain absolutely focused on the safety of everyone coming through the gates at OceanaGold every single day. From a production perspective, both Haile and Didipio performed well in the Q1. In New Zealand, as previously disclosed, we had a challenging Q1. Macraes was affected by having to take one of the ball mills down for a major repair, and Waihi experienced challenges due to extreme rain events which caused sliding in parts of the Martha underground and prevented access to the high-grade stopes in these areas. Pleasingly, we completed a temporary repair of the Macraes ball mill at the end of March, and it has returned to full mill capacity in April.
At Waihi, we are progressively regaining access to all areas of the underground mine and expect to deliver more tonnes at better grades through the remainder of the year. Peter's gonna talk to both items later on the call. During the quarter, we also made progress on our organic growth options, notably the Haile Underground Project, with our main production decline now advanced 550 meters. The decline has now reached the top elevation of the ore body, and we remain on track for delivery of our first ore from Horseshoe Underground in the Q4. With this enhanced access from underground, we also expect to begin underground exploration drilling at Horseshoe in the Q2, targeting both resource conversion and growth. On the topic of exploration, we continued drilling at Wharekirauponga in New Zealand as we work towards delineating this high-grade deposit.
In the Q1, nearly 800 meters of drilling was completed, focused on infill of the main EG vein. We expect to be able to update the market with results later this year. We produced around a quarter of the midpoint of 2023 guided production in the Q1. We expect the Q2 to be the strongest production quarter of the year for the company. We are well positioned to generate strong free cash flow at these current metal prices. I'm pleased to say that we also paid our previously announced $0.01 per share semi-annual dividend recently in the month of April. Now, moving on to some highlights from the Q1.
You can see we produced 118,000 ounces of gold and 3,500 tons of copper, both in line with full-year guidance. Our all-in sustaining costs for the quarter were $1,567 per ounce on 112,000 ounces of gold sold. From a financial perspective, we reported an adjusted net profit after tax of $39 million, which equates to an adjusted EPS of $0.06 per share. We did report negative free cash flow of $16 million, slightly below plan due to over 6,000 ounces of gold at Haile being produced but not sold at quarter end. Other working capital outflows are associated with planned Philippines annual tax payments and annual employee incentive payments for 2022, which were made during the quarter.
We do remain in a strong financial position with $191 million of net debt, a leverage ratio of 0.3 times, and liquidity of $158 million at the end of the quarter. This gives us the financial flexibility to continue investing in the exciting growth projects across our business. I'll now turn the call over to Scott McQueen to provide an overview of our Q1 financial highlights.
Thank you, Gerard, and good morning everyone. Q1 financial results were broadly in line with expectations, given the temporary challenges faced by the New Zealand operations during the quarter. Despite a small quarter-on-quarter reduction in sales volume, revenue was $244 million, a $6 million increase relative to the prior quarter due to higher average gold prices received. Note, our Q1 gold sales were lower than gold produced, reflecting the timing of sales around quarter end and gold in transit. We expect to benefit from the reversal of this timing difference in the coming quarter. EBITDA for the quarter was $100 million.
It was a $9 million reduction relative to the prior quarter, with the Q1 impacted by the timing of sales around quarter end, as mentioned, higher G&A costs, and a $2 million non-cash unrealized FX loss relative to a $16 million FX gain in the prior quarter. These non-cash FX adjustments mainly relate to movements in the New Zealand dollar exchange rate during the period. Net profit after tax of $39 million was broadly consistent with the prior quarter. When adjusted for the non-cash unrealized FX loss, this equates to an EPS of $0.06 per share, fully diluted. Operating cash flow equated to $0.14 per share, fully diluted, both slightly ahead of analyst consensus estimates.
While the Q1 EBITDA, net profit, and EPS were sound and were an improvement quarter on quarter on most measures, Q1 free cash flow was lower at negative $16 million. This was mainly due to the delayed sales previously mentioned, combined with typically high Q1 working capital requirements, which included the payment of some annual Philippines taxes, annual insurance premiums, annual bonding, and the payment of annual employee incentives, as Gerard mentioned. We expect to see these impacts normalize as the year progresses, and we remain well on track to deliver strong free cash flow at current prices across the full year. As outlined at the start of the year, we continue to expect stronger group gold production and free cash flow in the Q2 relative to the first.
Overall, at the end of the Q1, we would remain well on track to deliver our full year guidance. I will now turn the call over to David Londoño to discuss the Haile operation.
Thank you, Scott. Hello everyone. The Haile operation continues to maintain a low injury frequency rate with 1.6 recordable injuries per million hours worked at the end of the quarter, a 15% reduction compared to the end of 2022. Safely and responsibly delivering production is the highest priority at OceanaGold. I am very pleased with the continued efforts of the Haile team to keep each other safe. This quarter, gold production of 48,000 ounces was higher than the previous quarter, primarily due to higher-grade mining Mill Zone, which was offset by slightly lower mill tonnage as consequence of the freeze event that occurred in late 2022, combined with a shutdown early in the quarter.
Haile expects to remain within full-year all-in sustaining cost guidance, achieving $1,552 per ounce sold in Q1, while continuing to integrate continuous improvement projects in key operational and capital areas. Cash costs of $673 per ounce sold in Q1 were impacted by timing of gold sales, slightly offset by lower operating costs. Q1 was an exciting quarter at site. On March 6th, we welcomed visitors to celebrate the opening of the Horseshoe Underground. We have made significant progress on the Underground since receiving the SEIS in Q4 2022, are on track for first ore in Q4 2023. We also continue to invest in exploration with a healthy $7 million budget this year.
In the Q1, we continued our drilling focus at Palomino and have an underground drill scheduled to begin drilling at both horseshoe and horseshoe extension later this quarter. To give some more detail on the underground ramp up, the focus during Q1 was on advancing development of the main decline and ventilation portals. The decline has now made an important milestone, reaching the 1035 Level, which represents the top elevation of the horseshoe underground ore body. Year to date, we have completed 741 meters of total development, for an average of 273 meters per month. Meanwhile, work has been advancing at our surface project as well, with progress being made at both the waste pile facility and tailings storage facility expansion.
We are pleased with the work being done on surface as the expanded footprint allows additional operational flexibility and optimizes material handling. At the waste stream plant expansion, all the bulk piping installation has been completed. The plant is now energized. Commissioning began at the end of April. The plant is expected to be fully operational this quarter. Overall, the Haile expansion project remains on schedule. I'm very excited about the future of the mine. I will now turn the call over to Peter Sharpe to discuss Didipio and our New Zealand assets.
Thank you, David, and hello, everyone. Starting with Didipio, the mine continues to be one of the safest operating mines in the Philippines and the mining industry in general, and reported a 12-month moving average recordable injury frequency rate of 0.88 injuries per million hours worked at the end of the quarter. Q1 gold production of 33,000 ounces was 14% higher than the previous quarter, with copper production of 3,500 tons being consistent previous quarter. A good start to the year and sets us up really well to meet the full-year production guidance for Didipio. Didipio's Q1 all-in sustaining costs was $585 per ounce, while cash costs were $566 per ounce, which helped deliver strong margins for the period.
The 45% quarter-on-quarter decrease in all-in sustaining costs is mainly due to higher gold sales along with lower sustaining capital expenditure. We do expect sustaining capital expenditures to increase through the year and expect Didipio all-in sustaining cost to be within full-year guidance ranges. We continue to study the options for increasing underground mining rates at Didipio to at least 2 million tons per annum and expect to be in a position to share the findings from this work by the end of this year. On the exploration side, we began follow-up drilling on the two recent discoveries we announced in December and will continue delineating these and other targets throughout the remainder of the year.
Moving over to Macraes, the operation reported a 12-month moving average recordable injury frequency rate of 2.9 injuries per million hours at the end of the Q1, a much improved 43% reduction compared to the end of the previous quarter. Macraes produced 27,000 ounces of gold for the Q1 of 2023, 33% lower than the previous quarter. Reduced mill throughput and lower average feed grades were the key drivers of this decrease. The throughput impact was caused by the cracked trunnion on the ball mill that Gerard mentioned earlier. While the lower grade was predominantly due to the lower underground ore tonnes in the quarter. The repair to the ball mill trunnion was completed at the end of March, and normal mill throughput rates were achieved in April.
We also completed a planned shutdown of the ball mill in mid-April to inspect the condition of the repair, and pleasingly, everything looked good. We are undertaking an engineering assessment now and expect to have a full feed end replacement designed and ready for installation in early 2024. Underground mining at Golden Point Underground was impacted by a fall of ground in late February, resulting in a decision to upgrade ground support in all of the intersections and turnouts in the main decline. This work was completed at the beginning of April, and development rates are expected to return to full capacity by the end of Q2. Stoping rates are unchanged from original plan, which is to hit full capacity in Q3.
Stronger operational performance at Macraes is expected through the rest of 2023 as the mill has now returned to full capacity and high-grade ore from Golden Point Underground is being processed. For Waihi. Waihi produced 10,000 ounces of gold for the Q1. This was broadly in line with the previous quarter. As previously reported, the North Island of New Zealand and Waihi operation experienced abnormally high rainfall at the beginning of 2023. Over one meter of rain fell during the first six weeks of the year, to put this into context. This impacted productivity in the underground mine, especially in the areas of Edward and Empire West, and the mining had to be developed into alternative areas of the mine due to flooding.
On the expectation that rainfall will continue to moderate as it did in March and April, the company expects to be able to access the previously flooded areas in the Q2, which will allow the Q1 production impacts to be recovered across the balance of 2023. I will now turn the presentation back over to Gerard.
Thanks, Peter. I'm pleased to welcome some new faces to our board and management team. Linda Broughton has been recently appointed to the board of directors and brings with her a successful track record as an accomplished executive in the mining industry. Linda's background in environmental geochemistry, water and tailings management, mine reclamation and closure, as well as risk management, will provide us with a unique perspective and add tremendous value to our board and to our shareholders.
We also recently announced the appointment of Marius van Niekerk as Chief Financial Officer, who will join us towards the end of this month. Marius is a very capable and dynamic executive with global commercial and financial expertise, both in the resources and technology industries. I'm very confident he will help sustain the integrity of our financial reporting and governance systems, as well as generate significant value for the company.
Though he will be with us for a while, yet I'd like to take this opportunity to thank Scott McQueen for his more than six years of dedicated service and high-quality contribution to OceanaGold. Scott's a high caliber, high integrity CFO, and we appreciate his commitment to support the onboarding and transition to Marius, as well as completing several important projects throughout 2023. I'm confident Scott's going to get a few more farewells and best wishes before he eventually leaves us. For now, I'm going to take the opportunity to acknowledge his contribution to the company and to the excellent support and wise counsel he has provided me over the past year.
In summary, we remain committed to our goal to safely and responsibly deliver on the production and financial expectations set at the beginning of this year, which we know to be a key requirement for the market. We're focused on safely and responsibly maximizing the free cash flow generation of the company, and we've made good progress in our journey of realizing the organic growth potential in our portfolio. Shareholders can be certain our objective is creating shareholder value and generating higher returns to shareholders. With that, I'll now hand the call to the operator and we'll go to questions.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you'd like to withdraw your question, please press star followed by two. If using a speakerphone, please lift the handset before pressing any keys. Please go ahead and press star one now if you have a question. Your first question will be from Ovais Habib at Scotiabank. Please go ahead.
Thanks, operator. Congrats, Gerard, and OceanaGold team on the Q1 beat. This is despite challenges of the New Zealand operation, so it's a great job there. Just a couple of questions from me. Number one, you know, great to hear that Haile underground expansion remains on track. You guys are doing, you know, the underground decline is advancing to the first production level. Have you know, as you progress to the production stope that you're looking to develop, have you started doing any sort of grade control drilling? If so, have the results been in line with your expectations?
David?
I can answer the question. We actually haven't started drilling yet. We have the drill in transit, and we plan to start drilling in the next couple of weeks.
Okay. Thanks for that. Then just that, then moving on to Palomino, you're looking to convert resources reserves in early 2024. Will you be, you know, releasing an updated underground study on the back of this resource or reserve conversion? You know, any thoughts around there?
I, first off, I mean, I'll take that. I mean, I guess we'll be data-driven Ovais. I guess the drill results and the magnitude of what that means for the mine, and, you know, its materiality will govern that. You know, we do have a study underway. The study will be informed, firstly by the drill results. Yes, as and when it's of a magnitude that, you know, causes there to be material change, that will compel us to do an updated study.
Got it. Thanks for that, Gerard. My last question, just on the Q4 conference call, you mentioned that OceanaGold is kind of working on optimization studies at, I believe it was Macraes, Didipio, and Waihi. Are you looking to release these studies to the market? If so, when, should we expect these results? Or also any sort of progress on those studies and any sort of expectations that are being built up within the, within the company?
Look, as and when the... Let's say they're all in progress, and they're variously, to, you know, at Macraes, it's, you know, we have a, the Round Hill Option study, which we, you know, provided some detail on, as you say, in the Q4 results. You know, that's underway and will be, you know, as soon as it is completed, and again, subject to its being materially different to what is the current flight path of the asset, we would update the market. A lot of the other studies that are going on across the business relate to underground optimization, particularly at Didipio.
That, I think Peter mentioned on the call just now, the target they're looking to take it to from its current underground mining rate. As you'll appreciate, Ovais, any time that any of our underground mines, any of our sites when we can get more from underground, whether that be at Macraes, Didipio, and of course, Haile, the benefit that we get from a grade perspective and then a waste handling perspective is really powerful. A lot of work being done to see if we can increase the amount of material that we get from underground at all sites with those underground operations.
Yes, in, as a general statement, you can be certain that as and when we complete the studies and we've got something to say, we'll be really all too pleased to share that with the market.
Sounds good. Thanks, Gerard, for the color, and thanks for taking my questions. That's it for me.
Thanks, Ovais. Appreciate it.
Thank you. Once again, as a reminder, if you do have any questions, please press star followed by one on your touchtone phone. Your next question will be from Mike Parkin at National Bank. Please go ahead.
Hi, guys. Congrats on the quarter. Just one follow-up to Ovais' last question there. The multi-year guidance, I would assume, doesn't factor in any potential optimization upside at the various undergrounds, would it?
Oh, look, I mean, there's a certain level of improvement, but not in terms of a step change nature. No. We don't have the kind of step change in Didipio, for example, that Peter spoke about reflected therein. It does represent upside to that multi-year outlook.
Okay.
There is a degree of improvement in our multi-year outlook as well. It's, I think it was, but with some of those studies, particularly, again, the one at Didipio, that represents, you know, quite a considerable change in potential.
Okay. Well, thanks for that. We're seeing a number of miners beat on earnings and, you know, noting an improvement on consumables. Your OpEx tracked very nicely relative to my estimate. Can you just highlight some of the areas where you're seeing, you know, the biggest wins? Diesel's been mentioned by some of your peers. Is that something you're seeing improve quarter-over-quarter?
In short, yes. I guess the end of it has had a commodity price exposure at its core has translated into better pricing. That also relates to some reagents. I mean, we really got stung with a surge in reagent costs last year. That has pulled back to varying degrees. It does vary by reagent, but we're pleased to say that certainly the rate of inflation has slowed and in some cases it has decreased in terms of price to again, to varying degrees.
I think the other thing that's changed is that, you know, the supply side response has lifted and then some of those constraints, particularly, those relating to, you know, shipping out of China, that you will all recall was constrained with, you know, the delayed lift of COVID restrictions in country. What we've also seen is just a speed of supply to the market has also improved. Yeah, it's, we haven't fully reverted to the pre-inflationary surge that we all experienced as an industry last year. Certainly, getting some reversion on some elements this year.
Excellent. On TCRCs with respect to the Didipio, are you seeing any improvement on those contract prices? Are they still kind of locked up for a period before renegotiation?
I believe they're the subject of an existing contract. Scott McQueen, you can probably clarify.
Yeah, that's right, Gerard. Hi, Mike. Our current contract lasts about another 12 months, and we're in the process of getting ready to go through the proper commercial process to see what, you know, how we can improve that whole structure. That'll be part of it. Right now, they're, they've been locked into the contract for the last short period.
Okay. Just one last question. When we were down at site to see the Haile underground, it certainly showed that the more challenging ground conditions seem to be behind you. Is that still the case? You're noting, you know, pretty impressive development rates of about 10 meters a day. Just any kind of comment in terms of conditions of the rock, inflow of water, et cetera. You know, the water was fairly modest when we were there. Is it staying, lower, higher?
David?
We're definitely seeing a big improvement on the ground conditions. The water is being diminished. We actually, April was a very good month for us, where we advanced 300 meters during the month. It's ramping up really nicely.
Great. Okay, that's it for me, guys. Thanks so much.
Thank you, Mike.
Once again, ladies and gentlemen, if you do have any questions, please press star followed by one on your touchtone phone. At this time, it appears we have no further questions. Please proceed with closing remarks.
Well, look, thanks everyone for taking the time for the call this afternoon to listen to the webcast. The replay will be available on our website later today. On behalf of everyone at OceanaGold, really appreciate you joining us and wishing you all a very pleasant rest of the day. Bye for now.
Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we do ask that you please disconnect your lines.