Ann: OGC Revises 2019 Guidance & Releases Preliminary Q3 Results, page-4

UBS Global Research
15 October 2019
OceanaGold Corporation
Didipio to Cease Processing

Oceana reports Sep-19 quarterly production
Oceana announced today that a decision has been made to cease processing at Didipio
due to the ongoing blockade of the mine by the local government. Stockpile processing
had been continuing following the cessation of underground mining in Jul-19, but the
site has now exhausted consumables. Management remains hopeful that the renewal
of the mining lease which is a Federal matter will be successful, but the timing of this
remains uncertain. While disappointing news, we believe the share price is already
heavily discounting this issue. Our valuation is $4.32ps based on a US$1,500/oz gold
price and a 20% WACC at Didipio. Stripping out our valuation for Didipio our NPV
would fall to A$3.68ps. We maintain a Buy rating on Oceana due to valuation with
resolution of the issues at Didipio representing almost a free option.

Sep-19 quarter production
Production was 107koz, -9% vs UBSe with the lower production driven by a
combination of Haile, Waihi and Macraes. While Didipio production has declined
50%q/q, it was actually 4% above UBSe. AISC at Haile were US$1,106/oz, +11%
above UBSe, but performance is trending in the right direction, with costs -20%q/q.
New equipment and management at site is expected to lead an ongoing turnaround in
performance. Management has cut 2019 production guidance to 460-480koz to which
reflects cessation of production at Didipio through to the end of 2019.

Impact on our earnings and valuation
We now assume that Didipio’s operations do not resume until 2020Q1 and have cut
our production forecasts by 4% to 475koz. Our forecast NPAT is cut by a much more
substantial 35% to US$45m. We factor in a resumption of Didipio production in
2020e, which leads to a 4% upgrade to NPAT as stockpiled concentrate worth
~US$50m is sold. Oceana reports its full results on 31-Oct-19. We value Oceana based
on the spot gold price. Due to the recent decline in the gold price, we have cut this
assumption to US$1,500/oz, from US$1,550/oz. This cuts our NPV by 7% to $4.33ps.

Valuation: $4.33ps (NPV, 6% d.r. and a US$1,500/oz long-term real gold price)
Our price target of $4.30ps (was $4.70ps) is based on our NPV.