OceanaGold (TSX: OGC; ASX: OGC) closed 32% higher on the Australian Stock Exchange on Dec. 7 after announcing that the Philippine government is moving forward to finalize a long-delayed renewal of an agreement governing the company’s Didipio gold-copper underground mine.
Philippines President Rodrigo Duterte has instructed the nation’s Department of Environment and Natural Resources to work with OceanaGold and the Department of Finance on a new Financial for Technical Assistance Agreement (FTAA), the company said.
OceanaGold kicked off the renewal of the 25-year permit in 2018. After it expired in June 2019, the company kept Didipio operating under a temporary licence, but a blockade backed by the local government forced the Brisbane-based miner to suspend operations a few weeks later.
The FTAA’s renewal has been slowed down by the Covid-19 pandemic, claims that Didipio had been operating outside the Indigenous Peoples’s Rights Act, and the Bugkalot tribe had been seeking to expand its domain over parts of the FTAA area.
The mid-tier gold producer recently received a “certification of non-overlap”, which states the FTAA area is outside the ancestral domain of local indigenous communities.
OceanaGold said the document proves it has “strong endorsement of the residents in the local communities in and around the Didipio mine, including indigenous peoples.”
It added that it’s ready to restart the operation as soon as it gets the go-ahead.
It’s understood that around 75% of the mine’s 1,500-workforce has been permanently laid off since June 2019, with 900 let go just last month.
OceanaGold warned earlier this year it could take up to 12 months to restart the mine from care and maintenance.
The company has overcome conflict with the Philippines government in the past, including a 2017 plan by former environment and natural resources secretary Regina Lopez to suspend several mining operations in the country.
Farooq Hamed of Raymond James, described the news as “a clear positive” and said he believes “positive engagement and eventual sign-off of the FTAA renewal by the Office of the President is the final step in allowing Didipio to re-start given the renewal was previously endorsed by all other relevant government ministries including the Department of Environment and Natural Resources (DENR), Mining and Geosciences Bureau (MGB) and the Department of Finance (DofF).”
Hamed also pointed to the support for Didipio from local communities. “OceanaGold was recently granted a Certificate of Non-Overlap which states that the FTAA area is outside the ancestral domain of the Indigenous Cultural Communities,” Hamed commented in his research note to clients. “The company has strong endorsement of the residents in the local communities around the Didipio mine including the Indigenous Cultural Communities and Indigenous Peoples.”
Brian Quast of BMO Capital Markets commented in a research note that Didipio makes up 12% of the company’s operational net present value and “generates significant free cash flow for the company when in operation.”
The analyst noted that news of the potential restart will likely assist OceanaGold in its discussions with lenders.
“The company has overall $200 million credit facilities due December 31, 2021,” he wrote. “The facilities are with a multi-national group of banks. A restart of Didipio prior to the maturity of these debt facilities should be useful in any refinancing discussions.”
Quast currently models a restart in mid-2022. “The company is not yet giving any timelines on a restart, and given the impact of the Covid-19 pandemic and the amount of bureaucracy still required, we are not yet prepared to model an earlier restart of Didipio.”
Didipio, which began production in 2013, has measured and indicated resources of 1.3 million ounces of gold and 160,000 tonnes of copper.
In addition to Didipio, OceanGold has three other mines — Haile in the United States, and Macraes and Waihi in New Zealand.
An earlier version of this article first appeared in MINING.com, part of Glacier Resource Innovation Group.