OceanaGold said on Friday that the outlook at its Haile mine in South Carolina is now uncertain, after 18 staff members tested positive for covid-19 since June.
According to the company, approximately 220 workers have been required to self-isolate for a two-week period at some point since the beginning of March.
“This has had an impact on material movement, which is key to accessing some of the higher-grade portions of the ore body,” BMO’s Brian Quast said in a note to investors.
The company now expects Haile’s 2020 production to range between
135,000 and 175,000 ounces of gold. Full year production had previously been estimated at between 180,000 and 190,000 ounces.
“Given the continued fluid situation in the US regarding covid-19, combined with productivity losses due to weather, the outlook at Haile for
the remainder of the year is now uncertain,” said Michael Holmes, president and CEO of OceanaGold.
“We are behind schedule on our targeted mining advance rates,
which is delaying access to the higher-grade zones of the open pits necessary to achieve the significantly higher production levels expected in the latter months of the year,” Holmes said.
“In our view, the coming months will see a number of such guidance downgrades (for both H2 2020 and 2021) as the impacts of lower pre-stripping and planned maintenance over recent months is factored into future plans,” said Quast.
OceanaGold previously reduced the full year production guidance for its Macreas operation, in New Zealand, to between 140,000 ounces and 150,000 ounces of gold, after operations were impacted by a government shutdown in April.
The company expects total production for 2020 to reach between 295,000 ounces and 345,000 ounces, down from the previous estimate of 340,000 to 360,000 ounces.
In response to the uncertain outlook, OceanaGold also entered into a new forward gold sale arrangement with Citibank, BNP Paribas and the Commonwealth Bank of Australia.
The miner will receive a pre-payment of approximately $77 million, in exchange for delivering of 40,000 ounces of gold in the second quarter of 2021, representing approximately 10% of next year’s expected gold output excluding any contribution from Didipio mine, which is under a dispute with the Filipino government.
“This recognises the change in the timing of operating cash flow and provides additional liquidity to continue to manage the near-term risks of covid-19 while continuing development of Martha Underground ahead of first production in the second quarter of 2021,” Holmes said.
Midday Friday, OceanaGold’s stock was down nearly 6% on the TSE. The company has a C$1.9 billion market capitalization.