Good morning and good afternoon, ladies and gentlemen, and welcome to OceanaGold 2018 second 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 session. If at any time during the call you require immediate assistance, please press star zero for the operator. This call is being recorded on July 26th at 5:30 P.M. Eastern Standard Time. I would now like to turn the conference over to Mick Wilkes. Please go ahead.
Thank you, good morning and good evening to everybody. Welcome to the OceanaGold second quarter 2018 results webcast and conference call. It's a pleasure to be here with you today to discuss another very strong quarter of operational and financial performance. Others here with me today from the OceanaGold executive team, and they'll provide specific details on our results. With me is Michael Holmes, Chief Operating Officer, who will talk you through our operational results we're expecting from each of our assets for the remainder of the year. Scott McLean, our Chief Financial Officer, will discuss the strong financial results we achieved for the quarter and the half year. Craig Feebrey, our Executive Vice President for Exploration, will take you through some of the significant drill results we've seen at the Martha project and our exciting new prospect, WKP, in New Zealand.
Moving on to slide two, the usual cautionary statement. Before we proceed, note that all references in this presentation adhere to international financial reporting standards, and all financial figures are denominated in U.S. dollars unless otherwise stated. Also note, 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. Please refer to the disclaimer. Right. Slide number three. I'm more than pleased with our performance in the first half of this year. All of our operations are performing well, delivering on production targets, and generating strong cash flows. Although we still have room for improvement, our business is in a very good place right now. Revenue and profits in the first half of the year are up year-on-year.
We continue to generate strong profits, frankly, have consistently generated strong profits for quite some time. We remain one of the most profitable gold companies in the sector. The profitability of our business has contributed to the continued strengthening of our balance sheet with net debt cut in half from where we were a year ago. Our cash balance continues to increase, up 58% from a year ago, 45% from the first quarter this year. With that continued strength of our business, the board is pleased to announce our second semi-annual dividend for this year, which includes the payment of the $0.01 per share plus an additional $0.01 per share, reflecting our strong outlook.
Our organic growth opportunities continued to be significant drivers for our business with the advancement of the permitting of the 10-year mine life extension at Waihi, expansion of the Haile process plant where the pebble crusher is nearly fully commissioned, and the permitting for the Horseshoe underground and larger open pit at Haile about to commence. In addition, the Didipio underground is advancing quite well. Exploration is another major driver for our business. As our last two exploration press releases have indicated, we have great potential through the drill bit to create additional organic value for shareholders. Moving on to slide 4. On the back of the strong start to the year, we now expect higher gold production from our business, with Didipio being the main contributor for the increased guidance, as well as Haile and its strong performance at Macraes.
Strong performance at Macraes, which is off to a great start. On a consolidated basis, we now expect to produce between 500,000 and 540,000 ounces of gold, which is up from our original guidance range of 480,000-530,000. We've increased the lower range of the Haile gold mine guidance from 135,000 to 140,000 ounces. While the Didipio gold guidance has increased about 20% and now expected to produce 95,000 to 105,000 ounces this year.
On slide five, as I mentioned a few minutes ago, the board is very pleased to declare our second semi-annual dividend for the year, which includes the $0.01 per share and an additional $0.01 per share, reflecting a very strong operational and financial performance, cash flow generation, and balance sheet, as well as our positive outlook for the business. The payment of the dividend further reflects our desire to return a portion of the cash flows generated by the business back to shareholders, while maintaining our intention to continue investing in our business and further strengthening our balance sheet.
This is what I have often referred to as running a balanced business. When looking back over the past few years, on average, we have had a dividend yield of about 1.2%, which compares to our dividend-paying peers, who on average have had a dividend yield of about 0.8% over the same period. Although our dividend is modest, we are pleased to have included a discretionary amount. On slide six. On a consolidated basis, our operations produced 268,000 ounces of gold and 7,800 tons of copper in the first half of the year, which aligns well with the increased guidance range. We delivered another strong quarter of production, with each operation up from the previous quarter, with costs lower. Production was up 14% quarter-on-quarter. Didipio led the way for the increased production, while Haile Processing rebounded from the previous quarter.
Macraes had a strong quarter and getting stronger, and we saw noticeable improvements at Waihi. The operational performance culminated in a strong financial performance with revenue in the first half of the year up 21% and profits up 45% over the same period. Our adjusted earnings per share on a fully diluted basis was $0.07, which was better than consensus of $0.06 per share. While our adjusted cash flow per share was a compelling $0.17 per share and a solid beat of consensus, which stood at $0.15 per share. I would like to point out that after we pre-released our production figures for the quarter, some analysts upped their financial estimates. Before these adjustments, consensus was $0.05 earnings per share and $0.13 cash flow per share. It was a strong beat.
On slide seven, I'd just like to emphasize that this is the 33rd consecutive quarter where we've delivered a positive return on invested capital. This is no accident. We set out to build a business that was highly profitable and profitable at almost any commodity price. Our consistent return on invested capital results clearly demonstrate that the investments we make are prudent and designed to generate strong returns over the long term. Meanwhile, our EBITDA margin for the first half of the year was a solid 52%, which maintains our standing as having one of the highest EBITDA margins in the gold sector. I'm very pleased with our results. We're only starting to see the share price react to this performance. It's only a start, and we have some more ground to make up after a relatively soft year in 2017.
I'll now turn over the presentation to Michael to discuss our operating performance.
Thank you, Mick. Good morning, good afternoon, everybody. I'll spend the next few minutes going through our operational performance, which saw each of our operations up on production. If we turn to slide nine, our safety performance remains an important focus for our business. We still have a bit of work to do to further drive the type of safety culture we aspire to from our operations. At the end of the first half of 2018, our rolling 12-month total recordable injury frequency rate is slightly higher at 4.6, with Didipio performing well and better safety performance from Macraes. The safety culture and behavior of our workforce is critical and continues to be our emphasis for delivering a work environment that is free of injury.
Focus continues in the area of effective visible leadership in the field with safely supportive interactions with our employees during workplace inspections and task observations. We continue to be focused on managing the principal hazards and ensuring we have effective controls in place through our structured forward-driving programs. The majority of incidents that have occurred in the quarter are of lower severity, medically treated, and restricted work injuries related to sprains, strains, and finger lacerations. These injuries are all easily preventable and are unacceptable as we strive for an injury-free workplace. Over the next quarter, our workplace workforce safety behavioral program will be implemented at Haile. Moving on to slide 10 and the operational performance at Haile. Production was slightly better in the second quarter than in the first quarter, with a significant improvement in the plant utilization being the major difference.
This led to an increased quarter-on-quarter mill feed, which was partly offset by slightly lower head grade. The head grade will continue to drift lower in the third quarter before returning to the second quarter levels in the fourth quarter. We are also expecting to continue increasing throughput in the plant while maintaining current recoveries. Recovery was similar to the previous quarter, despite the lower head grade and only achieving grind sizes in the lower 20 microns. This is a positive from our perspective, as recoveries in the second quarter were similar to the first quarter, while the head grade was lower quarter-on-quarter. We are continuing to learn more about the plant and making adjustments necessary to deliver good recoveries. As the workforce continues to be trained and gain experience, our operational performance should also improve. Mining activities are a key focus for us.
We're continuing to drive productivity improvements. This takes time. We're not where we want to be. However, we expect to get there through further training of the workforce, more effective maintenance programs, and the focused leadership. As we mentioned last quarter, we are implementing MineStar, a GPS and data collection technology designed to monitor and optimize equipment productivities. The plant expansion continues to progress well, with the pebble crusher fully constructed. Commissioning is nearly complete. We've also upgraded our tailings thickener and continue to look for other bottlenecks as we seek to increase throughput rates up to the 3.5 million-4 million tons per annum. The tower mill and IsaMill equipment have been ordered, and we expect to have both in operation in the first quarter of 2019.
The outlook for the rest of the year for us, producing about the similar amount of gold in the second half of the year, while continuing to drive further improvements to productivities through the strong leadership, continuous training, and improved operating practices. We're also working with the regulators to submit our permit application for the Horseshoe underground and the larger open pit design. This is an exciting milestone as along with the plant expansion, will make Haile a 200,000 ounce a year producer. Finally, exploration is a key driver, not only in the day-to-day operations, but also for the future resource growth. We have learned a lot about the geology and the structures at Haile over the past two years, and we're all excited about the future potential at Haile. Moving on to slide 11 and the Didipio in the Philippines.
We've had another strong quarter of health and safety performance and production from this operation. It continues to be a leader in the ESG and continues to win awards for environmental excellence. Production at Didipio increased quarter on quarter on the back of an increased head grade and better recoveries. The increase in head grade is related to a change in mine sequencing, where we've mined a portion of the crown pillar in the high-grade breccia zone from the surface. The area we mine will be backfilled with cement and rock to stabilize the pillar. This will allow us to more effectively mine the breccia zone in the underground. The sole purpose for this change is for geotechnical reasons, as we continue to learn more about the rock competency as we continue to mine.
There is the added economic benefit from mining and processing high-grade material now compared to this material being mined and processed at the end of the mine life. The high-grade material continues this month, before dropping off for the remainder of the year. The underground operations continue to ramp up the plan with two more stopes mined in the quarter and a third underway. We've also increased the size of one of the stopes in the monzonite zones. This potential shows us there's further potential to look at increased sizes of the stopes in the monzonite area in the future. Meanwhile, a water storage stope is nearing completion. By having this work completed, which assists with the water management, it also then facilitates the opening of more stopes and mining fronts. Costs are generally in line with expectations thus far.
As underground operations ramp up, we see the unit costs move towards the $36 per ton as we expected. Through further efficiencies such as optimizing mine plans and stope sizes, like what we've already done, we will achieve these lower costs. For the rest of the year, the Didipio production will be slightly lower in the second half due to the lower grade. However, it will continue to generate good cash flows. Moving on to slide 12 and Waihi in New Zealand. Waihi saw increased production from better operating performance and equipment availability. The increase to material mined and processed drove the lower unit costs. Development of the exploration drill drives continues in the quarter. As Craig will discuss shortly, drilling from the multiple platforms along these two drill drives has yielded some exciting results.
We continue to remain focused on our health and safety at Waihi and the consistent performance from the operations. Our communities team continues its positive engagement with the town of Waihi and the regulator as we advance the permitting process for the 10-year mine life extension at Waihi. Turning over to slide 13 in Macraes in New Zealand. Macraes had a strong quarter of operational performance. Health and safety performance improved. Production increased. Macraes is generating some very good cash flows, and we expect this to increase in the second half of the year. Mining operations focused on the high grades from Coronation North. Continues the operations in Frasers underground. The ore tons mined increased quarter on quarter. We mined less waste. For the second half of the year, we expect the mine to mine a lot more ore with slightly lowering the overall strip.
Mining grade is expected to be like the second quarter. However, our head grade, particularly in the fourth quarter, is expected to increase as we process a higher portion of the higher-grade material from Coronation North. Costs are in line with expectations, we expect them to be slightly lower in the second half of the year on high production and sales. Looking ahead to the rest of the year, we expect production at Macraes to be slightly stronger in the second half, with the fourth quarter being the strongest on the back of a higher head grade. We currently have a few initiatives underway to further increase the mine life at Macraes, which is currently at 2021. Exploration is a key enabler, with a focus on drilling around the existing operations in other areas, including Deep Dell.
We are looking at our mine plans and how we can convert some of our resources into reserves through more optimal mining. While the Round Hill project continues to advance with exploration around the Golden Point, yielding positive results as well. I will now turn it over to Scott McLean to discuss our financial performance. Thank you.
Thank you, Michael, and hello, everyone. As illustrated by both Mick and Michael's comments, the company had a strong quarter of operational performance, and unsurprisingly, that is also reflected in an equally strong financial performance, as illustrated in the next few slides. Turning to slide 15, where we have a financial results overview. Here you can see a steady period-on-period increase in top-line revenue, with the current quarter sitting at $206 million. The year-on-year trend reflects not only higher prices, but also the inclusion of Haile's commercial operations post Q4 2017. That addition has been partially offset by the expected drag-driven year-on-year reduction in production from Didipio, and to a lesser extent, Waihi. The quarter-on-quarter revenue increase reflects higher sales volumes, partially offset by a 3.5% reduction in average gold prices received.
On pricing, I would also highlight that the impact of the recent falls we have seen in copper prices, should they continue, will have a reduced impact on us for the balance of 2018, given we have hedged 80% of our forecast 2018 copper production at $3.19 a pound. For the second half of the year, that equates to about 6,000 tons, or for our North American participants, that is about 13.2 million pounds of copper in the second half. Moving down, you see our EBITDA also increased quarter-on-quarter, consistent with the revenue. As Mick mentioned, we continued to deliver strong EBITDA margins, with the second quarter achieving 52%. Also as mentioned by Mick, our EBITDA margin remains at the top tier of gold producers. We recorded equally strong net profit after tax of $45 million, or around AUD 60 million for the Australian listeners.
While that's flat compared to quarter one, the second quarter included higher operating profits, which were offset below the line through lower unrealized gain on hedges. You might recall in the first quarter results, we included the $6 million unrealized gain on our copper hedge. The second quarter also included the write-off of some exploration costs related to tenements no longer considered prospective in the U.S. Moving to slide 16, which provides some information on our cash flows for the quarter and the half. As you can see, cash flow generation remains strong, with operating cash flow increasing by 41% quarter-on-quarter. That increase reflects a combination of higher revenue and, in a reversal of what we saw in quarter one, a positive movement in working capital. Cash flow used for investing purposes was relatively flat quarter-on-quarter and about 18% lower year-on-year.
The year-on-year reduction largely relates to the completion of construction and commissioning of Haile that took place in the first half of 2017. There's some additional detail on the next slide in regards to our capital investment program that I'll take you through. Financing cash flows for the quarter were relatively modest, with the quarter-on-quarter increase driven by the inclusion of our dividend payment in April. Moving to slide 17, as I said, a bit more detail on where the CapEx has been spent. On a quarter-on-quarter basis, we've seen a small pickup in the level of exploration in general operating CapEx, the latter being somewhat typical with our general operating CapEx with projects built progressively across the year.
Growth capital was relatively flat quarter-on-quarter, with the spend relating primarily to the Haile process plant, the pebble crusher in particular, but also progressing the broader Haile expansion. It also related to continuing the development of the panel 2 underground at Didipio and of course, the Martha project at Waihi. Mine development and pre-strip costs are tracking according to plan, with the bulk of this investment occurring at Haile and Macraes. I'd also highlight that H1, the first half pre-stripping and mine development is higher than what we expect to see in the second half. Exploration's been focused primarily around Haile and of course, Martha Underground, along with greenfield work at WKP in New Zealand and the Argentine exploration JVs, both of which are included in the corporate column at the bottom right. But overall, I think our capital program is tracking according to guidance at this point.
Moving to slide 18, so a little bit of detail on our balance sheet, our liquidity and debt position in particular. I'm particularly pleased to report that we ended the quarter in a stronger financial position, thanks to our equally strong financial and operating performance. Our cash balance increased 45% quarter-on-quarter, and net debt is reduced by 58% relative to this time a year ago. As a result, we closed the quarter with about $130 million of cash in the bank. In the second quarter, we also completed several amendments to our revolving credit facility. Based on the strong outlook of the business, we were very pleased that our entire existing bank group all committed their ongoing support.
Under the amended terms, we've extended the tenure of the facility by 12 months to 2020, which means our next required scheduled repayment of $50 million is now not until 31 December 2019. The balance of the facility matures at the end of 2020. The amendments also included the revision of a number of covenants, which reflected the expanded operational footprint of the business, as well as the stage of maturity of the assets. We also achieved a reduction in average margin on the facility. We believe the amendments give us the flexibility to do a number of things, including maintaining low effective debt levels, allowing us to use our cash flow to make discretionary repayments against that facility.
It also ensures we can progress the numerous exciting organic growth opportunities we have across the portfolio. Also continue to provide returns to shareholders, as we've just seen through the dividend we declared today. Our total debt now stands at $232 million, $200 million of which relates to the revolving credit facility and $32 million in equipment leases. When considered in light of our strong cash position, we had a very low net debt of approximately $104 million at the end of June 2018. All in all, a very strong set of financial results for the quarter and a very robust position we find ourselves in at this point in the year. I'll now hand over to Craig, who will discuss some of our latest exploration results.
Thanks, Scott. Hello everyone. I've got a couple of slides that I'll discuss in order to highlight the recent drill results that were released for Waihi and WKP. Moving to slide 20, the first of two slides. As Michael mentioned earlier, we continued to drill from multiple drill platforms along two underground drill drives at Martha. This is an extensive drill program comprising around 47,000 meters, scheduled over 2018 and 2019 to test the exploration target as defined and delineate further resources. As a reminder, exploration target in the Martha underground ranges from 3.5 to 5 million ton with a grade of between five and seven grams and looking at 500 to 700,000 ounces. When we couple that knowledge with historical data and recent drill results, our confidence in increasing the resource improves.
That confidence is reflected in our mine life extension plans as discussed with the regulators, community, and other stakeholders to date. You'll see from the slide in our latest Waihi news release that we continue to intercept significant mineralization from the Martha and Empire veins. We're hitting structures where we expect them, as well as additional mineralized veins not included in our exploration target model. I'd just like to highlight, this is a substantial exploration target with a combined, excuse me, a combined strike of the four major structures. That's Martha, Empire, Royal, and Edward veins, are 3.2 kilometers with a vertical extent of around 500 meters. Moving on to slide 21 in WKP. We're very excited about the prospects of WKP with significant drill results continuing to be returned from the two drill rigs currently turning.
There are three major structures that we're targeting, with the East Graben vein being the structure we'll focus on for the remainder of this year's program. As you can see from the listed significant intercepts on the right, which are really a subset of a number of other important intercepts included in our latest press release, we're looking at mineralization that is akin to what is being and continues to be mined from Waihi. That is good width. In the case of these Graben vein, averaging around seven meters and 12 grams per ton gold. It is, of course, early days, and we've got a lot more drilling ahead of us over the course of the next two years. However, we're very excited with the drilling results to date. We'll continue to focus on that East Graben vein over the course of this year.
Overall exploration across the business is going very well, not just at Waihi or in the Coromandel. We're also achieving good results at Haile, Macraes, and Didipio, and we'll provide the market with updates in due course. I'll now pass it back to Mick to wrap up today's presentation.
Thanks, Craig. Thanks, Scott. Thanks, Michael. Before we start the Q&A session, I just wanted to outline our priorities for the remainder of the year and close out with one last thought for your consideration. As I mentioned at the offset of the webcast, we're in a very good place right now. Our operations are performing well, delivering on production targets, and generating solid cash flows. Haile continues to demonstrate its top-tier status. Didipio continues to shine operationally, financially, and socially. Macraes is generating some very good cash flows, and with a significant resource base, we do have optionality there. Finally, it's clear that there is a lot more mine life at Waihi. A lot more than what the Street is attributing to it, for sure.
For the remainder of the year, we expect production in the second half to be similar to the first half while cash flows remain strong. Our organic growth opportunities are all advancing well, while exploration continues to demonstrate that we are operating in prolific gold belts. We will continue to drive further efficiencies at all our operations, whether it be through productivity improvements or the implementation of technology.
We're on track to deliver our increased guidance while continuing to be one of the highest free cash flow yielding gold companies with solid margins and that deliver strong returns. Ladies and gentlemen, that concludes the formal presentation segment of our webcast. We'll now take some questions over the phone, and I'll turn the webcast over to the moderator to facilitate those questions.
Thank you. Ladies and gentlemen on the phone line, should you have a question, please press star followed by one on your touchtone phone. If you're using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. Your first question is from Michael Slifirski, Credit Suisse. Michael, please go ahead.
Good morning. Thank you. I've got three or four questions, if I may. First of all, Craig, the WKP target, I want to understand the points you've got there. The size that you describe it as, but saying it's open in all directions. Just don't mean to be semantic, but the 750 meters by 250 meters by seven, we can do some maths around that and, with your projected grade, see what the potential endowment is. Is that the right way to think about it? Secondly, you're saying open in all directions, meaning that those dimensions get bigger or that simply that's the target that you're yet to drill to?
Thanks, Michael. With respect to the first point, yes, the dimensions we provide there are based essentially on six holes that were drilled at approximately 120 meters spacing to give us that strike length with a buffer either side. The dip direction you can see, I think it was in the latest press release. There's a preferred host we think is the rhyolite, although we do see mineralization and economic widths in grade in the andesites below. Certainly along strike, we continue to map that structure and it continues either as veins or alteration. You could argue in the dip direction it could be constrained, at least in the area we're drilling, because we don't know outside of that and the geology does change, we think, in terms of that andesite. In the dip direction, it may be constrained by the undifferentiated rhyolite.
In the section we're looking at, that would cover in the area we've drilled approximately 350 meters, I guess.
Okay. Thank you. That's helpful. Secondly, Holmesy, perhaps with respect to Haile, there's been quite a number of comments from you and Wilkesy in recent quarterlies about sort of productivity issues and work to be done. Just want to understand what the challenge has been there in that new mine, new training. When you look at the productivity you've achieved at Macraes, why can't that be transferred across? Is it a cultural issue? Is it a sort of skill level issue? Is it an equipment issue? What is it that you're not being able to achieve at Haile to date that you've achieved elsewhere?
Yeah. Thank you, Michael. I suppose when you look at it's a combination of a lot of issues which are similar to ones that you've talked about. It is basically a new mining district within the U.S. It is an area that has, I suppose, a lot of difficult mining conditions at the top of the ore body with the saprolite. It's just understanding that as well as gaining a workforce that is relatively new to the mining area. We are using the experience that we have at Macraes with some of the people that have been over there to assist in the operations. Really it is a mining operation that's just starting up in a new district and we're going through a bit of those teething issues as we work out, as we move forward.
So if we look at the-
Sorry.
I was gonna say, if we look at the cost you're reporting for mining versus what your aspirational costs were, in the NI 43-101, is that sort of cost aspiration, if I recall, was around $1.80. I'll stand corrected. Is that still what you're targeting or has something sort of structurally changed?
I don't think anything structurally has changed, Michael. We are targeting that price and we're working down towards that price. We are making sure that we have the right equipment, and that price sort of includes some equipment that we still have to purchase as well as moving some additional tonnage. We're ramping up the throughput and the movement of tons but also getting some additional equipment to do that, which is the right size equipment. The larger 789s and 785s. At the moment we're sort of mixing it with the 777s and 785s at the moment.
Thank you. That's helpful. Thirdly, Macraes, the comments about life extension, and I can't remember how that was to be achieved or what the wording was about more optimal mining or something. Just to understand really, presumably that's something that you've defined already. Is it further cutbacks of old pits with different economics? What's the target that you've identified that might extend mine life beyond current visibility?
Currently the drilling is continuing in the Brownfields area, we're continuing to drill out the Coronation ore body, continuing to drill the Coronation North as well as the Deep South, and looking at the potential for the Frasers continuing on that as well.
It's just a timing issue with regards to unlocking the value with the Frasers West Pit, which we've got towards the end of the life of the mine, and the opportunities there with the Frasers West Pit and the Frasers material as well.
Okay. Thank you. Finally, with respect to Waihi permitting, it's not clear in my mind what the steps are to that ultimate timeframe that you've defined. In terms of milestones that we should be looking for, public consultation and so on, where are the challenges going forward that might sort of see you do better or worse than your timeframe?
Yeah, look, the process is you go out to initial public consultation, and that's to gain feedback from the locals as well as the regulatory and the government bodies. We put in the application. We've actually put in the permit application now. That process is a couple of months process where we put it into the councils. The councils review our permitting, our application, and they come back with requests for information. It's just normal sort of due diligence on the work that we've put forward and some queries. That goes then to council hearings, and then just depends on whether the council hearings, whether the issue gets resolved or whether that requires further steps in the process, which then goes to Environment Court. Hence sort of the timeframe we've given on that total process is 18 months.
If things can get resolved earlier, then it's generally before the 18-month process. I suppose the advantage that we have got, Michael, and as we've explained before, is that this process is not new to Waihi. What we're asking and what we're currently doing with regards to mining under the pit and mining in the areas that we are mining, has all been done before in previous consents. The beauty and the value is that there's nothing new, and everybody sort of understands the process to go through. That, I suppose that's the process. We've added the additional sort of understanding and the timeframe based on historical learnings, and that's why we've sort of forecasted that 18-month process.
All right. Thanks, Michael.
Thank you.
Thanks, Michael.
Your next question is from Mick Schroba, from Macquarie Capital. Mick, please go ahead.
Good morning, Mick and team. Just a couple of questions from me. On to Didipio, there have been some media reports that suggest that the gold producers are in the clear with respect to the mine audits. Is this your understanding, and what's the timing looking like for, say, formal approval there?
Yeah. Thanks, Mick. Yeah, that's correct. The reports are accurate and consistent with what we've seen on the ground. Our experience with the MICC audit team was very positive. We got terrific feedback from the audit. What was reported in the press, was that, the four mines that were under a cloud still were all laterite mines, which is fundamentally the issue that the government is grappling with. As before, we're very confident that this process will see us in the clear. There are meetings and steps being taken by the department, the Department of Environment and Natural Resources. MICC is presenting their findings publicly at the end of the month, and we expect some positive news soon after that, although I'll pull up short of making a prediction.
Okay, great. Thanks for the update. Still on Didipio, how has the stoping performance been so far from the two stopes that were mined during the quarter in terms of dilution and managing the water inflows there?
Yeah. Good. The stopes have come out very cleanly. As Michael mentioned in his presentation, we actually took a double span stope as a trial in the monzonite. The monzonite is the stronger material. That held up really well. That all does well for either double height stopes or double width stopes or both, in the future, which will reduce the unit cost a ton. In the breccia area or the other parts of the ore body, those stopes are performing well. The pump station is at the pump station number 1, capital pump station number 1 is firing, and we're seeing water levels drop in the mine as a result. All under control.
Okay. Great. My final question, are you able to give us an indication on the improved margin or the blended interest rate on your long-term debt that you've been able to push back over 12 months?
Yeah. We achieved about a 15% reduction in margin, not 15% growth, obviously, but 15% relative reduction in margin.
Okay. Excellent. Thanks for that.
Thanks, Mick.
Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question is from Chris Thompson from PI Financial. Chris, please go ahead.
Hi. Good day, guys. Congratulations on a really good quarter. Just got three questions here. We'll start off with Haile. Just trying to dig in, just trying to understand what sort of grade profile we can expect for the back half of this year. You mentioned that we can expect more tons offsetting lower grades. Are we looking at grades similar to the Q2 or the Q1?
Slightly lower in the third quarter, then a little bit better in the fourth quarter. It's just as we're sort of mining the bottom of the Mill Zone pit then starting the Snake zone, so the Snake pit. As we go through the Snake pit, we'll be getting the better grades as we mine a little bit deeper there. That won't present itself until the back end of the year.
Okay. All right. Great. Thanks for that. Just on the Didipio, just trying to understand the longer-term ramifications of the change in the mine plan here. Looking at these unit costs, for instance, on a mining unit cost side of things, can you give us an idea of what the unit costs are right now from underground?
Well, it's reported in the MD&A, Chris, it's $45 a ton, stoping costs. Our target, once we're fully ramped up, is 37.
All right. Okay. Sorry, thanks, missed that. Just to give us a sense of the mix, the mill feed mix between your stockpile and your underground ore, are you still gonna be pretty consistent at current levels?
No, Chris, we're increasing, we're ramping up the underground. This year, we're expecting that 500,000 to 600,000 tons out from underground, that then gets supplemented with 3 million tons from the open pit. We'll ramp that up next year to around that 1.2, 1.3 million tons to 2020, where we're at a run rate of 1.6 million tons. At 1.6, you're basically feeding sort of 2 to 2.2. The stockpile ratio will come down as we ramp up the underground.
All right. Considering the new mine plan and that, there's no adjustments as far as the mix between ore types?
No.
Okay.
The optimal sort of underground production throughput rate we've got is at 1.6.
All right. Okay.
It's short to be achieved that year-on-year. That'll be from 2020.
Okay. Yeah. No, I got that. Thanks. Just finally, just Waihi. Have you got an idea of when we can anticipate a revised resource update, or are we gonna wait for the wrap up, I guess, the annual resource updates announced sort of March next year? Can we anticipate anything earlier?
Yes, Chris. We will put out an update in the near future based on the drilling that's been completed to date for the Martha underground. I think we've flagged that previously.
We've done about a third of the drilling so far, and we'll give that update in the near future.
Okay, perfect. Thanks, guys. Congrats.
Thank you, Chris.
Thank you. Your next question is from Raj Ray from Desjardins Securities. Raj, please go ahead.
Thank you, operator. Good morning, Mike and team. Just for starting off on Didipio. At the end of Q2, in the MD&A, you mentioned that you had around 246,000 tons of high-grade ore at 3.13 grams per ton. Is that all gonna be processed in Q3 itself?
No, that'll be processed over the remaining of the year and possibly going into the following year.
Oh, okay. Then, while still on Didipio, you mentioned that you have looked at widening the stope size. What % of your stopes over the life of mine is in the monzonite?
Yeah, the monzonite takes the majority of the percentage. I think off the top of my head, it's between 60%-80% of the materials in that monzonite. It's really just understanding the location of the monzonite beside the breccia and the other structures within the ore body. The trial that we've done, as Mick's mentioned, we've sort of done a double-width span stope, so instead of 20 by 20 by 30, it was 20 by 40 by 30. We'll also look at the opportunity for double height stope, so 20 by 20 by 60. Those have always been potentials that we've identified, and we've trialed it, and it's been successful. We're just looking at what are the other opportunities and how much we can sort of adjust the mine plan to take into that consideration.
Michael, if I remember correctly from the technical report, the average development per month that was estimated was around 550 meters. Let's say you go ahead with this doubling the size of the stope, increasing the height. Have you estimated how much reduction in your development would you get as a result of that?
We're still working through that, Raj.
Okay. Okay, thanks. One last question, maybe for Scott. Scott, if you look at the corporate G&A for the first half of the year, it's almost $28 million, so it puts us at run rate around $56 million. Can you tell us what's included in the corporate G&A, and what should we be looking for on a steady basis?
Sure, Raj. I would note the G&A has jumped up a little bit clearly in the second quarter, that reflects a change in the way we're treating excise tax, in particular out of the Philippines. Up until the end of the first quarter, historically, excise tax in the Philippines had been capitalized because we were in what we call the recovery period under our FTAA. Moving forward, there will be a step up due to a reclassification of that 4% of gross revenue. Beyond that, the G&A includes all corporate costs, all project development, exploration team type costs that come through corporate expenditure, and all other below-the-line taxes in the Philippines, including local business taxes, real property taxes, et cetera, appears in that line in the financial statements.
Okay. If you look at the second half of the year, do you expect it to be the same run rate as Q2 or lower than that?
Yeah, closer to the Q2 run rate than Q1, given the excise tax change in classification.
Okay, thank you. That's it from me.
Thank you.
Thank you, Raj.
There are no further questions at this time. Please proceed.
Well, thank you, everyone. That concludes our webcast and conference call. There will be a replay available on our website later today. On behalf of the team, Michael, Scott, Craig, and myself, and the rest of the team that put it together, thank you for joining us. Should you have any follow-up questions, please don't hesitate to contact our excellent investor relations team. Bye for now.
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