Good afternoon, ladies and gentlemen, and welcome to the OceanaGold 2021 2nd Quarter Results Webcast and Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer This call is being recorded on Thursday, July 29 at 5:30 pm Eastern Time. I would now like to turn the conference over to Elisa Howe. Please go ahead.
Good evening and good morning. Welcome to OceanaGold's Q2 2021 results webcast and conference call. I am Elisa Howell, Investor Relations Manager for OceanaGold. I am joined today by Michael Holmes, President and Chief Executive Officer of OceanaGold, along with Scott McQueen, Chief Financial Officer and other members of the executive team, including the committed to David Bondano, EGM of Haile Craig Seabury, our Executive Vice President of exploration and development and Sharon Flynn, our Executive Vice President of Sustainability. Before we proceed, note that the references in this presentation adhered to International Financial Reporting Standards, and all financial figures are denominated in U.
S. Dollars unless otherwise stated. Also note that the presentation contains forward looking statements, which by their very nature are subject to some degree of uncertainty. There can be no assurances that our forward looking statements will prove to be accurate as future results and events could differ materially. I refer you to the disclaimers on forward looking statements on the final slide of our presentation.
Michael, over to you.
Thank you, Alisa, and good evening, good morning to all. It's a pleasure to be here with you today, especially post our most recent news, the renewal of the Didipio FTAA, which is the 1st FDA renewed in the country, of which we are very grateful to the government of Philippines for their support through the process. This is an exciting development for us, and we are looking forward to recommencing the operations, which I will discuss during the presentation. We delivered our 3rd consecutive quarter of improved profitability on the back of record gold sales from Haile, robust average gold prices and notably improved the margins. We are delivering on our commitments.
It was a particularly strong second quarter at Haile. The operation sold 59,000 ounces of gold and over 104,000 ounces of gold through the first half at all in sustaining cost of $9.53 per ounce, putting us well within range of its full year guidance. Haile's record performance was partially offset by lower sales from Macraes, which delivered a lower than expected first half performance due to an extended mill shutdown and mining limitations. With these disruptions largely resolved, we expect a strong second half from Macraes. At Waihi, we recommenced sustained milling and bought Martha Underground production online.
We continue to advance our exciting organic growth projects. Total capital investments during the quarter of approximately $95,000,000 We're focused on growth, including the Martha Underground and Golden Point Underground Development and the Haile paved waste rock storage expansion and CSF lift. We ended the first half with $142,000,000 in immediate available liquidity and have ensured our ability to continue to Deliver on our commitments is a core value for OceanaGold and the renewal of Didipio's FTAA has been a key strategic objective for OceanaGold since the operations were suspended in mid-twenty 19. Subsequent to the Q2 end, I am proud to share that we delivered on this commitment. The country's first FTA has been renewed by the Philippine National Government and is the testament to our team's tremendous effort and the strong endorsement from both the community and the government.
The mine is expected to be a significant source of free cash flow moving forward. Once Didipio reaches full operations. It is expected to produce approximately 10,000 gold ounces and 1,000 tons of copper monthly at first quartile all in sustaining costs. Under the revised share remains 60% Philippine National Government and 40% Oceana Gold. The amendments to the terms primarily focus on returning additional benefits to local stakeholders, which is consistent with Didipio's legacy as a significant socioeconomic contributor.
With the renewal in hand, our attention has immediately turned to the rehire and training of our world class Philippine workforce, which is a key catalyst to the operation achieving full production within the next 12 months. We expect to add over 700 employees to the existing operational standby team by year end. Processing is expected to recommence in the 4th quarter, mission with initial feed from the 19,000,000 tons of stockpile, grading at 0.5 grams per tonne gold and 0.5 percent copper. Within the next 12 months, we will reestablish our underground mining rate to 1,600,000 tons per annum, which will supplement the ore stockpile feed into the processing plant. The transport and sale of existing copper concentrate is expected to begin late in Q3.
The 15,000 tons of copper gold concentrate includes approximately 18,500 ounces of gold and 3,500 tons of copper. We look forward to Didipio's contribution to our portfolio over the long term. Moving on to Slide 5. And responsible mining is fundamental to the way we do business, and the health and safety of our workforce is a top priority. We are pleased to see improved safety performance in the 2nd quarter with the total recordable injury frequency rate trending lower to 3.7 versus 3.9% in quarter 1 as we continue to drive proactive health and safety initiatives across our organization.
The COVID-nineteen pandemic remains a pressing issue globally, especially as variants of the virus continue to emerge. As strict health and safety protocols kept our workforce safe while on-site. And we will continue to use these stringent safeguards for the remainder of the year. Turning to ESG. Last month, we launched our independently verified 2020 sustainability report.
The report highlights the significant progress made in a number of areas, including climate change, Human Resources, Biodiversity and steps towards compliance with the World Gold Council's Responsible Gold Mine Principles. Notably, we joined our peers by taking immediate climate actions with the release of a new statement of position on climate change that sets a net 0 operational greenhouse emissions goal by 2,050. Also as part of our journey to understand climate change risks, We commenced and reported on our first assessment of Scope 3 emissions. This year, we are building on 2020 achievements and advancing key initiatives that keeps us at the forefront of best practice globally. We are developing work plans and targets related to the very pressing global issue of climate change.
And this includes our commitment to provide 2,030 climate change reduction targets in line with the task force on climate related financial disclosures by the end of 2021. We are assessing how we respect and protect human rights across our operations in the Philippines, New Zealand and the United States. These assessments will be finalized and reported on at our year end at the end of this year. We are implementing our biodiversity standard across the portfolio. And in 2021, operations will establish biodiversity baselines and management approaches that commit to no net loss in areas of natural habitat and net gain in areas with critical habitat.
We will also continue to progress towards the goal of 100% compliance of the World Gold Council to responsible gold mining principles by the end of 2022. Our overall ESG performance has been recognized by the major ESG rating agencies, and we most recently maintained our A rating with the MSCI and outperform our ranking with Sustainalytics, putting us among the elite ESG performance in the mining industry. I will now turn it over to Scott McQueen, our financial officer, who will review our Q2 financial results.
Thank you, Michael, and hello, everyone.
The next few slides summarize the key elements
of our 2nd quarter and year to date financial results. I'm pleased to report that the 2nd quarter includes a 3rd consecutive quarter of improved profitability for the company. Quarter on quarter as well as year on year improvement in profitability reflects higher gold sales volumes led by a record second quarter sales of 59,000 ounces of hail, higher period on period realized gold prices. While hot material in absolute terms, it is also notable that the current quarter benefited from incremental sales from Waihi as Martha Underground commenced continuous production in June as planned. We now look forward to many more years of operations and opportunities at Waihi.
At Martha, gold sales were slightly down quarter on quarter, which was lower than expected and reflected the impact of additional unplanned milling downtime and mining constraints. That we do look forward to a stronger second half of maturity.
You can
see from the table that the first half EBITDA was 152,000,000 has nearly tripled over the same period last year and is up 45% quarter on quarter. As noted, this is the 3rd consecutive quarter of improved profitability and margins, with adjusted net earnings for the 2nd quarter coming in at $36,900,000 or $0.05 per share fully diluted. Year to date adjusted net earnings per share equates to $0.08 Moving to operating cash flow. We did see a decrease to $35,800,000 despite the improved profitability. The decrease being timing related, reflecting the physical deliveries into the gold presale arrangement for which we received proceeds in Q3 2020 at $19.20 per ounce.
During the quarter, we delivered just over 31,000 ounces or around $60,000,000 of revenue under the presale contracts. The final 9,000 ounces to fully close out these agreements will be delivered today. On an adjusted basis, excluding working capital movements, which is consistent with how it's been reported in prior periods, adjusted operating cash flow equated to $0.13 per share fully diluted for the quarter, bringing year to date cash flow per share to $0.22 Investing cash flow increased to $80,900,000 in the 2nd quarter, bringing our year to date total investments to 152,800,000 It's related to planned developments and the rate of investment is expected to reduce somewhat into the second half. Bulk of the year to date investments relate to the major key projects well underway or nearing completion, including Haile Waste Storage Expansions in the Haile Underground Early Surface Works, continued Martha Underground Development with the mine now producing, Golden Point underground development, where production is expected to commence in the Q4 and ongoing exploration, especially at high value targets in the Waihi District. Financing cash flow consisted primarily finance leases with no drawdowns on debt facilities during the quarter.
Moving to Slide 7. As at June 30, our cash balance stood at $92,300,000 with total available liquidity of 142,000,000 total net debt stood at $224,800,000 Reduction in our cash balance quarter on quarter represents expenditure on planned investments organic growth projects. As we have planned for these, we continue to actively monitor and manage liquidity as we move through the peak growth investment period this year. And we now also plan to ramp Didipio back into full operation. While our liquidity outlook is sound of these gold prices and we had prepared to continue our growth prospects irrespective of the timing of the GDPR restart.
With ramp up now commencing, we took proactive, prudent and low cost debt to further enhance short term liquidity headroom and increase flexibility by establishing a $30,000,000 working Capital Facility with Scotiabank. This short term facility forms part of the total permitted indebtedness under the company's existing credit facilities and the existing security package. While we don't anticipate drawing this facility and we expect the sale of concentrate stock and the restart of Didipio to contribute significantly to our free cash flow this year and beyond. We remain focused on ensuring all risks are managed proactively cost effectively and our key high value growth projects to be delivered on the optimal time line as they enter their latter phases. Turning to Slide 8, which includes a bit more detail on capital investments.
As mentioned, Our 2021 capital investment program is focused on advancing our organic growth projects into production. 2nd quarter capital investments were approximately $95,000,000 Of this, just over half was growth, including $28,000,000 at Haile and the initial hail underground works, dollars 17,000,000 at Waihi on the development of Martha and the process plant upgrades that facilitate the refinements of production and $4,000,000 of Macraes for the development of Golden Point Underground. Exploration spend totaled $6,400,000 majority related to the ongoing definition and expansion drilling at and around Waihi. The total also includes resource conversion of proposed underground stopes and extensional drilling at Golden Point Underground. Sustaining capital quarter on quarter and largely related to capitalized mining costs with $16,000,000 in pre stripping at Haile $14,000,000 at Macraes related to pre stripping at Deepdale North, open pit and underground development to access a new panel identified at Fraser's underground.
Due to higher mining costs early in the year at Haile and changes in mining sequence and activities at Macraes, we now expect higher proportion of our mining cost to be capitalized across the full year and had updated our pre strip and capitalized mining guidance accordingly. The projects are moving ahead strongly. As noted, Martha Underground commenced production late in the quarter as planned and on budget, and Golden Point underground is expected to commence by year end. Hale underground is moving forward with surface infrastructure progressing with commencement of underground development ready to progress post finalization at the SEIS. Based on the first half progress, updated timings at Haile and ongoing capital reviews.
We have reduced our full year investment expectations somewhat between $275,000,000 to 295,000,000 despite the increased allocation to capitalized mining costs.
Now, I'll turn the presentation back over
to Michael, who will provide details on operational performance during the quarter.
Thank you, Scott. And moving on to Slide 9. Haile delivered a record second quarter and best ever first half, producing over 100,000 gold ounces through the new year and doubling over the prior year period. Total gold production of 57,000 ounces in the 2nd quarter increased approximately 30% over quarter 1 as we moved into higher grade ore zones in snake phase 2. Mill feed increased 24% quarter on quarter with resolution of the quarter 1 outages and along with improved recoveries benefited overall production.
Mining unit cost of $2.60 per tonne decreased quarter on quarter, but increased nearly 10% over the prior year due to higher fleet maintenance costs. 1,000,000 unit costs also showed improvement quarter on quarter and increased over the prior year to date due to 1st quarter outages. All in sustaining costs fell well below $1,000 per ounce sold in the 2nd quarter year to date, reflecting high gold sales from improved grades and lower overall cash costs. These benefits were partly offset by the highland planned pre stripping capital expenditures in the Q2. Given the outstanding results year to date, We refined our expectations for the full year at half and now expect 160,000 to 170,000 gold ounces of production, which is in the upper range of the original guidance.
All in sustaining costs and cash costs have also been revised to just above the original guided ranges, now expected to be $1100 to $11.50 to $900 per ounce sold, respectively. Total cash expended total capital expenditures at Haile for the year are estimated at $135,000,000 to $145,000,000 which is moderately lower than original expectations. Lower growth capital spend has been partly offset by increased pre stripping related to New Zone Phase 2 Development and Ledbetter Phase 1 Development. Quarter development for the Gaal Underground is expected to commence with the receipt of the supplementary environmental impact statement originally expected by the year. The SEIS will allow continued development of the existing half footprint, expansion of CSF and pave cells and full development of the Haile underground.
Engagement with the U. S. Army Corps of Engineers in the South Carolina Department of Health and Environmental Control remains positive and ongoing as the company responds to inquiries received post release of the draft SEIS. We anticipate the record of decision and final permit in the Q4 of this year. Turning to Slide 10.
While we are pleased with the record performance in the first half of the year from Haile, We also recognize we have significant opportunities for improvement that can make this a world class asset. Recently, we advised commencement of a site wide technical review of Haile with oversight from our technical committee. We are currently assessing the physical performance in reviewing constraints in terms of both mining and milling. Through the diagnosed phase, we are building off our current improvements and identifying further bottlenecks and This process is intended to identify and prioritize opportunities to derisk the asset and potential to deliver additional value. We will identify and implement these initiatives that are going to deliver productivity and cost improvements and thus, more value long term.
In the short term program, we are reviewing plant availabilities, reliability, utilization and ultimately throughput. We're reviewing mining productivities in areas of drill and blast, waste and water management and mining selectivity, which is looking at bench height and dilution as well as equipment availability and utilization. And for example, based on industry standard benchmarking, all considered within the context of site specific constraints. We are of the view that the mining costs of $2.20 per ton or less are achievable over the life of mine. And as such, we are taking action to arrest escalation and deliver reduced unit costs.
Over the long term time frame of the operation. Water and waste management are also a primary area of focus. Construction of waste storage facilities and in some cases, re handling the waste rock to accommodate potentially asset generating material is over the life of mine and is capital intensive. We are currently working with regulators in the site to mitigate the need for additional paved waste storage capacity. Water management is also an area of focus, including excess water pumpage, storage water pumping for storage purposes and the management of input and on-site water, including road preparation for wet weather and drainage strategies.
We will also assess capital allocation methodology to the site, ensuring we are advancing the highest value projects for the site and within the context of the company's total portfolio. This includes mine trade off studies where we are reviewing the potential to convert future open pit pushbacks with higher strip ratios to underground mining at high cutoff grades. As you can see, there are opportunities for significant improvements at Haile, and we have determined to realize these. We are pleased to welcome our new Executive General Manager, David Longdono, to site earlier this month. David joins us from Kirkland Lake, where he was Vice President of Projects and prior as GM moved into a late gold mine.
Key brings decades of technical and operational experience and the contagious enthusiasm for changes to come at Haile. We expect to share more details of the site wide technical review as we move into the solution identification implementation phases at the coming months and provide a comprehensive updated findings post year end. Moving on to New Zealand. Ukraine's 2nd quarter gold production of approximately 32,000 ounces of gold was limited by geotechnical constraints and extended mill downtime. As a result, mining activities remain focused on waste movements, including pre stripping activities at the new Deep Delmore open pit.
And production unit over 67,000 ounces of gold was lower than expected. During the Q2, the operation completed the planned rebooking of the autoclave, installed the refurbished save mill motor and completed additional out of scope maintenance activities that resulted in a 5 day delay to restart. In addition, pit ore movement in Coronation North resulted in delayed mining of the high grade ore. These factors resulted in lower than expected production Q2. With the mill issues resolved and to full capacity and the geotechnical risk being managed by the team, Macraes is confident that a stronger second half is on track to deliver into the lower end of full year guidance.
However, as a result of these factors, the company is forecasting a consequently higher all in sustaining cost and cash cost due to changes in the mine sequence. As you can see in the picture in the lower corner of the slide, Golden Point underground development continues to progress with deliveries of new equipment arriving on-site during the second quarter. 1st production is on track for quarter 4 this year from the Baldwin Point. Moving on to Slide 11. Waihi produced just over 3,000 ounces late in the second quarter, taking year to date production to just over 8,000 gold ounces.
Sustained milling recommenced in late quarter 2 after a 7 week shutdown at the plant to upgrade the save mill and complete general maintenance. We continue to expect Whitehead to deliver 35,000 to 45,000 ounces of gold production this year at an improved all in sustaining cost and cash costs. Ramp up of gold production will continue, and we are targeting a production rate of 90,000 to 100,000 gold ounces
per year from the project over the next few years.
We continue to believe that Waihi North project, which includes Farakiraponga, represents the greatest value opportunity within our portfolio. Drilling continues at Farakiraponga, including resource conversion drilling on the Eastern Graven vein and a significant step out on the South Western Strike Extent at the main structure. Weather conditions improved in June and provided the necessary water levels to support continuous diamond drilling. We currently expect to deliver an updated pre feasibility study in early 2022 and further define the potential of this high quality asset. Moving to Slide 12.
We consider Didipio an integral part of our portfolio and its restart is a key focus for us for the remainder of the year. Activities for the restart are progressing to plan. Our initial focus is ensuring all the standard operating permits to ensure uninterrupted supply chains and sustainable operations. This includes discussions with the local government groups, evidencing the document detailing the startup plans we have developed. This is a critical process, and we want to ensure that we get it right.
Concurrently, the recruitment, rehire and training of our workforce is underway. Today, approximately 230 or onethree of job vacancies has been posted. And following a 2 week notice period, we will be in a position to start filling these roles. The interest in these positions has been overwhelming so far. We're also progressing the rehiring of critical roles, including the operational management positions, and this is tracking as planned.
I will refer you to the time line in our presentation, which provides a detailed overview of our restart plan over the next 12 months. We expect to restart the process plan in the 4th quarter, and this time line is driven by the required maintenance and recommissioning activities to reinstate, reinstall and retest all the equipment. Critical personnel and spare parts components are expected to be on-site by August month end to commence the restart process. And functions that can be restarted now are well underway. Processing of the existing stockpiles is expected to be supplemented by ore from underground with the commencement of the underground development and production currently expected in early October.
The underground will commence once we complete the onboarding and retraining of our personnel as well as implement reentry protocols required to ensure a safe restart. The ramp up will be over several months as we recommence the development and stope extraction sequence. COVID-nineteen remains a significant risk in the Philippines and especially at Didipio given the camp accommodations. Early in the Q2, the total number of positive COVID cases increased to 63 in line with local trends and has since decreased in June July. The New Mexico mine has existing COVID-nineteen management protocols, which we're developing with reference and in alignment to the national and international guidelines.
These protocols include testing and screening before mobilization and entry into the operation, precautionary isolation measures, regular testing and screening of the workforce and testing capability and capacity with efficient turnaround of results. The renewal of the FTAA and the restart of Didipio has been a key initiative for us, and we look forward to bringing the operation online and our valued Philippine workforce back website. Now looking to the future. Our key initiatives for 2021 are unchanged, however, with notable progress in most areas. Excellence in ESG and the commitment to responsible mining remains fundamental to the way we do business.
We delivered our 2020 Sustainability Report, reporting on key initiatives like carbon emissions carbon emissions that put us at the forefront of best practice amongst our peers. Delivering on our commitments is the core value for OceanaGold. And for us, that means achieving our 2021 guidance with successfully delivering
on organic growth. And at the
end of the first half, we remain on track to achieve both of these measures. Achieving our robust organic growth projects key to delivering shareholder value, and we're doing so in 2 geopolitical and stable jurisdictions, New Zealand and the United States. And the safe restart of Didipio remains a significant near term catalyst for the company. With the renewal in hand and the restart underway, We look forward to achieving full operations over the next 12 months and contributing to the Philippines' COVID-nineteen economic recovery. In summary, we're focused on bringing our organic growth online and restarting Didipio, which we believe is critical to creating shareholder value.
OceanaGold is a resilient and dynamic gold miner with a strong and sustainable future. And with the restart of Didipio operations, We believe that, that future is even brighter as we realize growth potential that is all our own. Thank you for joining us today, and I will now turn over the call well, we'll now turn the call back over to the operator for questions and answers. Thank you.
Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Followed by the 1 on your touch tone phone. You'll hear a 3 tone prompt acknowledging your request and your questions will be pulled in the order they are Keys. One moment for your first question.
Your first question comes from Oceaniah Bibb from Scotiabank. Please go ahead.
Thanks, operator. Hi, Michael and OceanaGold team. Congrats on a good quarter. Just a couple of questions from me. Just starting with maybe if David Londono can give us some color on his first 50 days with Oceana and any comments he can provide on any kind of operational improvements that will have improved improvements if you see that, Ael.
Great. Thanks very much, Eves, and really good quarter, as you said, and really happy to get to DPO online. And David, over to you for baptism with fire. Thank you. Thank you.
Can you hear me?
Yes, I can.
Okay. So yes, I've been there for a couple of weeks. And so one of the things that we're looking at as a win on the 1st 3 months or early in the game is going to be fragmentation. I think we increased the fragmentation at the mine. We are going to be able to increase throughput to the mill.
So I see that one as a win. We do have a little bit of difficulties with the drilling, so because obviously we have to increase the drilling. So we're looking and see how we are going to, let's say, optimize our drilling capacity outside. We see also waste management. So I'm doing an optimization of the waste to see how Can we better use the closest dumps to the mining areas and that we reduce the mining cost and increase our productivity on the chopsticks?
Other options that we have is water management. You can see that water is a big issue here in South Carolina. So We're looking into how we can take more water and discharge more water into in the area. And so to get a waiver while we get a lot of rain, particularly some of the year to improve and be up in our pits. So those are the things that I'm looking at the 1st 2 months.
Perfect, David. I really appreciate your comments and looking forward to hearing additional color from you over the next couple of months. My second question is just based on the first half production of around 177,000 ounces annual revised kind of guidance or tightening of guidance. The implied production for the second half is approximately about 180,000 to 185,000 ounces. It looks like Q4 is shaping up to be your strongest quarter within the second half.
Can you provide some color as to the percentage of production in Q3 versus Q4? In Q3 versus Q4. Thanks, Eves. It's a bit of a shuffling of the chairs. And so as we mentioned, Haile's production, as we previously discussed, will always be the first half weighted.
And then we'll see the ramping up of Waihi and a stronger quarter Ed Macraes. So, the quarter 3, quarter 4 was fairly flat overall when you sort of put them all in the mix and separate them out. Okay, perfect. And just did you already mention and maybe I missed it, but when did we get revised guidance when you're looking to release, provide guidance, including the Libio. Yes.
Look, We're working through the plans with regards to the detail, and we're ensuring there's a few activities that we need to do on the ground. And The first post denotiarization, it's a bit of documentation that we have to sort of follow the documentation streaming through registration, getting the business as usual permits through the NGP region to presenting the documentation to the local government units. As I mentioned, we're sort of posting the notice of employment notices on the boards and then for 2 weeks until we can start rehiring. So we're currently in this next couple of weeks really just sort of finalizing to ensure that when we do open and start the operations. It's going to be sustainable and uninterrupted.
And so once we sort of get a little bit further over this understanding period. And then I have the confidence with regards to bringing people back on and trying with the backdrop of COVID. We'll be presenting an guidance for this year and for the next 4 years with Didipio. As I mentioned, We haven't changed some of you with regards to what we sort of presented previously with regards to the 12 month ramp up and The stages of ramping up through the operation, but we'll be working our hardest to try and beat those and shoot those out of the water. So for us, the idea is to get the required permits, get all the material.
It has been on standby, which means that place. You have to regrease, rig oil, recommission everything as we go through all the pieces of equipment and to get that going. So focuses for us is to ensure that we have the right paperwork, the right support. So once we start, we don't get interrupted as well as focusing on getting the employees back, the equipment up and running and certainly focusing on getting the concentrate that's on-site at Amazon's office. Perfect.
Thanks. And that's it for me. So thanks to David as well as yourself, line.
Thank you very much, Elias.
Your next question comes from Mike Parkin from National Bank. Mike, please go ahead.
Thanks guys for taking my questions. Just kind of going back to the previous update on Haile. Can you give us a bit more color as Why you think there's a greater potential for potential acid generation of PAG material out of the pits and what your thought process is there to mitigate that in terms of the mine plan? Or It seems like you may be considering attacking some of the ore zones a little more from an underground basis versus an open pit.
Yes. Thanks, Mike. It's something that we've sort of been dealing with regards to just the understanding of the boundaries between the green. There's 3 categories of waste material. We have the green waste, the yellow panag and the repake.
The panag has to go on to construct itself, and the green waste can go in just some normal places. As we've sort of been mining it with some of the edge effects, We've identified that there's additional pay that we have been mining. And so we're now going through the processes of working with the governments to identify a couple of things. 1 is the amount of additional pay, the categories of the pay as well. There's some material that has been categorized tied that has been asset generating.
And so we believe that that can be coming Into a different game to the green light category. That's something that we're currently working with the regulators. And then just understanding The full amount of paid material within regards to the model is appreciated. The storage of paid is at a higher cost, and that's been sort of having to look at the late stages that we've got with kind of strip ratios,
it sort
of brings into that sort of trade off studies that we're looking at for We're seeing the underground potential as a real opportunity for Haile, to not only the hull, but the depth extension to the hull underground. We already decided the hex to hull extension as well as sort of the Palomino, the resource that we delivered on, 600,000 ounces of resource. We believe The 40% of the gold is in the top three levels there, and there's a good opportunity to move forward with that. And then so if You're sort of looking at those underground areas. Then if you're on the way out to from Haile Underground to Palomino, then you can certainly duck into maybe the bottom of that or snake, which has got the higher strip ratios.
So they're the things and they're the trade offs that we're looking at this point in time. And so that trade off sort of gets you back into a high grade ore. It looks at reduction of total amount of material to be mined from the open pit point of view and certainly the reduction in the amount of paid material as well. So yes, that's the sort of longer term programs that we're looking at. And not going to impact the short term plan that we've got for more sort of 5 plus years down the track, but that's certainly something we're looking at.
Okay. And then just in terms of employee availability, I know back when you guys went into construction of Hale, Unemployment rates are pretty high in the region. Since then, you've seen quite a bit of competition for labor coming into the area. Can you give us an update in terms of how that's shaping up, what the turnover rate is like, if there's significant cost pressure on a workforce for Haile. I remember you were looking to pull people in from the Nevada region, which We're showing some success in terms of interest.
Just an update on kind of the labor pool and cost of it would be great.
Yes. Look, it is something that has been a focus area, and it's certainly one of the things that David is looking at is the talent management and how we sort of progress that going forward. We have taken the turnover rates down significantly since sort of I think if you remember a couple of years ago, it
turned around that 40% down
to sort of 20s. We're trying to drive it down to double low double digits. The 20% is the low 20s It's still a proportion of company turnover as well as just employing turnout. For us, it still remains a focus, and it's something that we need to continue driving on and continue improving. We are seeing some opportunities within the market, but it is getting tighter and tighter.
Through the COVID period, as you You may remember that we did go to an employment agency to supplement the workforce during the period of when people had to be self isolated. So we're utilizing sort of those opportunities, but it's still an ongoing focus press release.
Okay. Thanks very much. That's it for me.
Your next question comes from John Tumazos, an investor. Please go ahead.
Thank you.
Concerning the Didipio restart, the concentrate inventory looks like a $50,000,000 to $60,000,000 source of cash. And then when you start milling, you're going to be milling down these stockpiles where they've probably already been expensed for mining. So how much More with the cash from inventory liquidation be larger and the development capital for underground work, training and other costs to restart.
Thanks, John. Yes, the concentrate on hand has significant value of current price is probably north of $60,000,000 in fact. The restart on the lower grade materials, as Michael mentioned in the presentation, sets of around Q4 and will certainly be cash flow positive. So yes, we'd expect very strong net cash flow generation and well in excess of what's required as part of the ramp up process over the next 6 to 12 months.
So was the $30,000,000 extra credit line you negotiated earlier in the quarter before you had the good news about the IPO restart.
Yes. We had started That negotiation process, John, would be while the uncertainty still remained around the time line in Didipio. Given the restart, it did take a little bit longer than we'd like, We're happy that it's underway. There is still unknown risks in the Philippines around COVID. That's probably particularly a risk around the transport concentrator and it's a 12 hour round trip to port through lots of communities.
So Given we've gone down that path, we thought it was prudent and cost effective just to continue and put it in place temporarily until we get the ramp up underway, but we don't expect to use it. As I said, we expect the cash
I saw Paul was named Chairman. We know him from SSR Mining. I had three things that came to mind. Forgive me if I'm a little bit mischievous in my question. I was wondering if you're looking to merge with an asset in Turkey or alternatively do a merger of equals.
That's where 2 companies with a little hair on them get together, each one thinking the other will solve their problems. And The CEOs get a change of control bonus and the bankers get fees, but the stocks don't always go up. Or Would you only sell out for at least a 50% premium, given how much your production is going to rise in the next 4 years? Forgive me for being teasing you a little bit.
Thanks, John. Look, guys, I think as our Chairman, current Chairman, Ian Reed. His view and thought process is that the Chairman's role is never lifelong role, and he believes that company should be structured and led at the appropriate time by the appropriate knowledge. And Ian has led us through the whole Didipio FDA renewal. So he basically got into the chair position when The boomeday came down and basically installed the successful renegotiation of Didipco.
India has stood aside, Recognizing that now we're in a ramp up growth phase at all our operations. We're in a consenting permitting phase of our operations, and he thought it was appropriate that something good long term mining knowledge to step up into the German role. And Paul Benson has accepted that position, Which is great for the company. And we've reinforced, I think, the skill set within the company as well with Nick McMullen coming and joining the Board. So Our focus is fully we've got 4 exciting projects, basically, the ramp up at Didipio, which, as I said, we're going to try and knocking at the lights.
It's a lot of activity is happening, and at the moment, the surface will look at dark. The surface is It's quite smooth, but we will once we open that, we will be throwing everything at it. We've got the exciting sort of market underground and ramping that up, the GPOG ramping that up and the Mahal work that we're doing. And it's a good time for us to sort of sit back and reflect, certainly with the team board members to sit back and reflect on the performance. It hasn't been we have improved, but it hasn't been where we want it to be.
And so this is a good opportunity both with the 2 new Board members as well as David coming on Board to actually really have a good look at how and Look at what the best way is moving forward. So really excited. We have some enormous potential coming through with the Wydey North project, which we're doing a lot of consultation with the communities around partnership with the communities around Waihi and the government as well and all registry bodies there. So We're very excited about the path going forward. So I think the Chair and the Board and the management group will be very busy Kicking the lights out and really pushing the business back into that world class path that we want to with the assets that we have.
And yes, that will hopefully get reflected in the share price as we move forward as well. We've had 3 consecutive good quarters, and we just want to build on that now Mr. Paducio coming back online.
Thank you. So to summarize, you've got 2 or 3 years of work to get the output up to 600 2,000 ounces or so. And it's not the right time to sell out, even though you have these M and A guys on your board that have sold their other companies.
Your next question comes from Farooq Hamid from Raymond James. Please go ahead.
Hi, guys. Good morning and good evening, everyone. Thanks for taking my question. I guess my question is somewhat related to the previous series of questions there. It's more related to the new FTAA agreement at Didipio.
I know that as part of the new agreement, there was some requirement that shares of the subsidiary, I believe up to 10% of shares of the subsidiary made available on the local exchange. I'm just wondering if there are any other restrictions or constraints that are included in the new FTAA agreement related to Oceana's ability to Potentially Sell the Operation Down the Road TO A Foreign Entity. Yes. Thanks, Frederic. Look, The FDA will, I think, excited me is a win win for both ourselves and the government.
The 10% within 3 years is really just sort of demonstrate the local the ability for local ownership. The other conditions are really around sort of additional community support from the broader Regulated Community Support, which is the SDMP, which really looks at the local barangay and the 10 surrounding barangay. So the additional support that has been put in there as more of a regional support. The potential sale of the dore to the Philippine National Bank is also Yes, localizing sort of the product, and we have the doorway that can be sold. So that was the other thing.
I mean, just sort of moving the sort of the corporate address to the provincial area. So they're really the only sort of in terms with regards to the renewal as well as a bit of a government sharing percentage with regards to the net NOK returns. There is no real impediment. So it's more just sort of along the structure with some additional benefits for the government and the locals, but predominantly the 64% split in the same terms and conditions. So I don't see any further impediments, Farooq.
If that was the case, I mean, we've got the 25 year agreement now. So for us, it's getting up there and delivering. It is a significant cash generator business. So and it's got a really proud, dedicated workforce there that is world class operation. That's what we will bring back to win at that world class operation within our cycle.
Okay. Thanks for that. And then maybe just a follow-up question. On The concentrate inventory that you have on-site now that will start to be sold in Q3 and Q4. Could you give us a rough breakdown of kind of how much you see being sold in Q3 versus how much in Q4?
Well, look, it's hard to determine that at this point in time. It's sort of We'll get the the components fit together. So it just depends on the ability to truck. So We'll probably we can sell it in parcels to Trafigura, but the trucking will start towards the end of Q3. So the majority of the sales will probably come through and be recognized in pool.
Okay. That's very helpful. Thanks. That's it for me.
There are no further questions at this time. I'll now turn it back to Elisa.
Thank you, operator. We do have one question submitted to the webcast for our management team. The question is, The current shares owned by the Board and management is low. Can we expect now that earnings is over for the Board and management
Thanks to this, sir. I'm heavily committed to the OceanaGold Chair, Paul Polley and myself. And I believe this is a perfect opportunity once we had a blackout for the rest The team and the Board to consider that option. So it's up to each individual member. The diamond deliveries is obviously some great opportunities there, yes.
Thank you, Michael. We have no further questions. So with that, I will conclude our webcast and conference call. A replay will be available on our website later today. And on behalf of Michael, Scott and the rest of the team, thank you for joining us.
Thank you, Mitch.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.