Ann: Company Interview. Strong Outlook for end 2, page-3

re: Ann: Company Interview. Strong Outlook f... Very positive interview for OGC.
Expecting to pay debt down by $40mill this qtr. Not sure if the full 40mill comes from the Dec cash flow but considering the $43mill net profit for the Sep qtr, I think it will. That’s an anualised $160mill/year free cash flow despite current low gold prices.

Sept qtr at Dipidio saw 2.7mill tonnes through the mill. 2014 (calendar year) is ramping up to 3mtpa and then 3.5mtpa for 2015.

That should see a strong increase in cash flow from the $40mill for this qtr or the $43mill net profit for the Sep qtr. Then beyond 2015;

“There’s plenty of potential for new ore resources on our ground in the Philippines and particularly around Dipidio. If we’re successful with exploration in the vicinity of the mine site, we will almost certainly look at an expansion for Dipidio to around 5 million tonnes of ore per annum.” Dipidio has a long mine life so this expansion potential beyond the 2014 and 2015 expansions is a big positive.

“The decision to buy the trucks which transport the copper-gold concentrate was made after commissioning was completed and we’ve achieved a very significant cost saving - the trucking costs have halved from around $100/t to around $50/t of concentrate. Also, the efficiency and reliability of the trucking fleet has improved immensely.”

This has moved to my number 1 pick for a gold company although it has exposure to copper as a strong by product so not a pure gold play. However it will have strong upside leverage to higher gold prices through NZ operations while being very safe from potential of lower gold prices because the copper credits for Dipidio give strongly negative cash costs. Still in Philippines for Dipidio, like MML but it’s in the north. No risk from the rebel conflicts of the south but more in the path of typhoons. However as reported tonight, the last strong typhoon that passed Dipidio caused no significant damage as they are well prepared for them.

At $40mill free cash flow they are on a free cash flow multiple of just 3.5. The PE might be around the same number based on their reported net profit for the Sep qtr of $43.7mill. However I’m not sure if the annual report will include expenses not included in the qtrly (especially something like write downs or other one off items).
In any case this looks like an excellent stock for low risk gold exposure.
This is a strong buy IMO.