OceanaGold Corporation (OCANF) CEO Michael Holmes on Q1 2021 Results - Earnings Call Transcript
OceanaGold Corporation (OTCPK:OCANF) Q1 2021 Earnings Conference Call April 29, 2021 5:30 PM ET
Company Participants
Allysa Howell - Investor Relations
Michael Holmes - President and Chief Executive Officer
Scott McQueen - Chief Financial Officer
Jim Whittaker - Executive General Manager, Haile
David Way - Executive General Manager, Asia-Pacific
Craig Feebrey - Executive Vice President, Exploration and Development
Sharon Flynn - Executive Vice President, Sustainability
Sam Pazuki - Senior Vice President, Corporate Development and Investor Relations
Conference Call Participants
Ovais Habib - Scotiabank
John Tumazos - John Tumazos Very Independent Research
Farooq Hamed - Raymond James
Operator
Good morning and afternoon, ladies and gentlemen. Welcome to the OceanaGold 2021 First Quarter Results Webcast and Conference Call. [Operator Instructions] Note that this call is being recorded on Thursday, April 29 at 5:30 p.m. Eastern Time. I now would like to turn the conference over to Allysa Howell. Please go ahead.
Allysa Howell
Good evening and good morning. Welcome to OceanaGold’s first quarter 2021 results webcast and conference call. I am Allysa Howell, Investor Relations Manager for OceanaGold. I am joined today by Michael Holmes, President and Chief Executive Officer of OceanaGold, along with Scott McQueen, Chief Financial Officer, and other members of the executive team, including, but not limited to, Jim Whittaker, Executive GM of Haile; David Way, Executive GM of Asia-Pacific region; Craig Feebrey, our EVP of Exploration and Development; Sharon Flynn, EVP Sustainability; and Sam Pazuki, Senior Vice President of Corporate Development and Investor Relations.
Before we proceed, note that 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 that 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. I will refer you to the disclaimers on forward-looking statements in our presentation. Michael, over to you.
Michael Holmes
Thank you, Allysa and good evening and good morning to all. I hope you are all safe and healthy. It’s a pleasure to be here with you today to provide an overview of our first quarter results and share the many exciting growth opportunities we have underway. Delivering on our commitments is the core value at OceanaGold and our quarter one results demonstrate that we are on the right path to deliver operationally as well as advance our organic growth. Profitability improved quarter-on-quarter on the back of higher average realized gold prices and improved margins despite mill challenges and lower gold ounces sold.
I am particularly proud of our operational teams who adapted and overcame normal course of business disruptions that have affected mill throughputs during the quarter. The teams quickly evaluated the challenges and then executed to find solutions. As such, we are on track to achieve the consolidated 2021 guidance. We are also on track and on budget as we advance our own organic growth projects. Total capital investment during the quarter of approximately $70 million, were focused on and included Martha Underground development and Haile PAG waste storage and TSF expansion.
We ended the first quarter with $196 million in immediate available liquidity and have structured our balance sheet to ensure our projects progress on optimal timelines, irrespective of Didipio’s status. Our ability to deliver long-term value to shareholders is predicated on the prudent capital allocation and the path is very clear to my team. We are focused on delivering on our commitments and we are excited about our future that will deliver long-term value to shareholders.
While many of our peers are seeking growth through M&A, we are growing significantly through prudent investments in our assets, leveraging existing infrastructure, personnel and our track record as a responsible mining company. We expect to bring online three new underground mines and expand our existing open pit operations, all in geopolitically stable jurisdictions. With our fourth quarter results and Investor Day, we announced our inaugural 5-year outlook, which you can see here, forecasting 75% higher production at 25% lower all-in sustaining costs. We are delivering margin growth, which for shareholders translates to real value over the long-term through the development of our high-quality assets. What’s also very exciting about this chart is that we have significant upside potential. The outlook does not include Didipio and restarting Didipio is a key catalyst and priority for us. We expect that once the FTAA renewal is finalized, the operation can contribute up to 120,000 ounces of gold and approximately 12,000 tons of copper annually. At first-quartile all-in sustaining costs, Didipio will be a significant source of free cash flow moving forward.
Moving on to Slide 5, responsible mining is fundamental to the way we do business, and part of responsible mining means prioritizing the health and safety of our workforce. The COVID-19 global pandemic continues to impact many of us in our daily lives and it is a reality that we are addressing at each of our operations. As at the end of Q1, approximately 121 positive cases have been recorded amongst our workforce since the start of the pandemic, including 11 at Haile and 9 at Didipio in the first quarter of this year. The Philippines and Didipio, hosts to adjacent communities, are still being impacted by COVID-19. And as such, in the spirit of bayanihan, or unity we are doing everything we can to assist locally by providing medical supplies, COVID-19 test kits and household care packages, including sanitizers, protective face masks and rice. At the site, we continue to enforce strict health and safety protocols, including mandatory and precautionary quarantines in an effort to reduce the transmission of the virus.
Our health and safety record is one of the best in the industries, but we strive to do better. We saw an uptick in the total number of recordable injuries in the first quarter. In response, each operation is reviewing the injuries in detail to prevent reoccurrence. Across our business, we are focused on key programs that have delivered a sustainable reduction in TRIFR over the last 8 years. And these include the management of principal hazards, fostering a culture that supports safe work practices and increased focus on occupational exposure in our work environments. We also continued to progress key initiatives this year in ESG, including the development of our 2020 emissions reduction targets, alignment with the global tailing standards and delivery of our first modern slavery statement reporting on future improvements in our supply chain processes.
I will now turn it over to Scott McQueen, our Chief Financial Officer, who will review our first quarter financial results. Thank you, Scott.
Scott McQueen
Thank you, Michael and hello everyone. The next few slides summarize the key highlights of our first quarter financial results. As illustrated on the summary table, the first quarter results reflect improved quarter-on-quarter profitability. This was despite lower gold ounces and some milling throughput constraints at [indiscernible] and Haile. As will be discussed later, our operational teams rose to those challenges [Technical Difficulty] throughput constraints that impacted the first quarter have now been resolved.
First quarter revenue came in at $149 million. The quarter-on-quarter reduction reflects lower gold production and sales. This was partially offset by higher realized gold prices with all of our New Zealand dollar gold hedge pushed out at the end of 2020. EBITDA benefited from [Technical Difficulty] G&A with 50% reduction in costs at Didipio, which totaled $4.5 million in the quarter. [Technical Difficulty] while still negatively impacted realized non-cash currency translation losses, the impact this quarter was reduced relative to the prior quarter. Accordingly, the stronger realized gold price and improved margins plus lower depreciation and amortization expense resulted in an adjusted net earnings of $21.8 million or $0.03 per share fully diluted.
Concurrently, operating cash flow increased to $47.6 million and excluding net working capital changes equated to $0.09 per share. As expected, investing cash flow increased to $71.9 million in the first quarter, reflecting Haile waste storage capacity expansion, increased Macraes pre-stripping and the continued underground development of Martha. Financing cash flows for the quarter consisted primarily of finance leases with no draw-downs on the debt facility made during the quarter.
Turning to Slide 7 and some information on our capital allocation strategy, as at March 31, our cash balance was approximately $146 million and our net debt stood at $163 million. This cash balance represents the planned investments in organic growth projects as we progress the development of 3 new underground mines to production over the next 2 years. We continue to actively monitor and manage liquidity as we move through the peak growth investment period in ‘21. For the quarter, we continue to prioritize the reinvestment of cash flow into our high margin organic growth projects, which we believe represent top tier investment returns that will deliver long-term value to shareholders. As we move beyond this peak investment period, we expect to deliver that inherent value as well as return free cash flow to shareholders.
Moving on to Slide 8, which includes some additional detail on our investments during the quarter. As already noted, our 2021 capital investment program is focused on the advancement of our organic growth projects. For the quarter, capital investments were just under [Technical Difficulty], which was largely flat quarter-on-quarter. Over half of that total was allocated to growth investments, including $15 million [Technical Difficulty] lift and PAG construction at Haile, $17 million for the continued development of the Martha Underground, which totaled just over 2,300 meters during the quarter. At Macraes, approximately $4 million related to the development of the Golden Point Underground, which is on track as planned. Sustaining capital expenditure was just over $24 million for the quarter and included $16 million in pre-stripping. Approximately $11 million of this related to activities at Deepdell North, open pit at Macraes with the balance primarily Haile. Exploration spend totaled $5.8 million, with the majority related to projects and targets at Waihi. However, it did also include some resource conversion drilling at Golden Point Underground [Technical Difficulty] conventional drilling the Horseshoe Underground at Haile. As mentioned, we are building 3 new underground mines, 2 of which will be online, Martha Underground and Golden Point [Technical Difficulty]. Our organic growth projects are progressing consistent with our guidance issued earlier and remain on track to be delivered as planned.
I will now turn it over to Michael who will provide more details on the operations during the quarter.
Michael Holmes
Thanks, Scott. And on to Slide 9, where we will discuss the improvements we have seen at Haile this quarter and particularly year-on-year. At Haile, first quarter gold production of approximately 44,000 ounces was 10% lower than the fourth quarter of 2020. The lower quarter-on-quarter production was due to the lower mill throughputs related to the processing on the saturated saprolite ore. The saturated ore blocked chutes to the primary crusher, resulting in lower mill utilization rates and a 20% reduction in the mill feed quarter-on-quarter. The operations team worked quickly to resolve this by utilizing the previously planned SAG and ball mill line and replacement shutdown to redesign and rebuild the primary crusher chutes, which thus far has effectively mitigated the blockage and we believe is a more robust design.
If you compare the current quarter to last year, gold production was over 50% higher largely due to improved mining productivity. Over the course of 2020, full commissioning of the 19 Komatsu 730E haul trucks increased hauling capacity by 30% and the successful implementation of the management operating system succeeded in delivering Haile’s best quarter yet in total mining movements, up 24% year-on-year and 7% quarter-on-quarter. Our current run-rate would put us at a total mining movement of approximately 40 million tons in 2021, besting 2020 and reduced mining unit costs.
Going forward, we expect to move a lot more material, which proves up – which provides upside for production and potential unit cost reductions for this year and beyond. During the first quarter, generally higher grades from Snake Phase 2 helped to offset the reduced mill utilization rate and we expect marginally lower recoveries related to feed grade to course correct through the balance of this year. We continue to expect 150,000 to 170,000 gold ounces of production in 2021 at Haile, which is 60% over which was delivered in the third – over 60% of which will be delivered in the first half of the year as we complete the mining in Snake Phase 2 and reached the high-grade ore portions in Ledbetter Phase 1.
Total capital expenditures for additional tailings and waste storage facilities are in the range of $60 million to $70 million as well as additional capital for the development of the Haile Underground. Portal development for the Haile Underground is expected to begin in the second half of this year and the project remains on track for first production in quarter four of 2022. This timeline is predicated upon the receipt of the supplementary environmental impact statement currently expected by midyear 2021. The SEIS will allow continued development of the existing Haile footprint, expansion of the TSF and PAG cell and full development of the Haile Underground.
Turning to Slide 10, Macraes gold production of approximately 34,500 ounces was impacted by a majeure rainfall event in early January that prevented access to primary ore sources in Coronation North open pit and Frasers Underground for approximately 2 weeks. As a result, mining activity was focused on waste movements as well as pre-stripping activities at the new Deepdell North open pit. In addition, the unplanned outage of one of the 3 existing side mill motors in early February reduced throughput capacity across the balance of the quarter. The refurbished side mill motor was back on-site earlier this week, with the refurbished motor installed and the completion of the planned re-brick of the autoclave. The plant will be fully operational at the end of this month.
Despite the impact of quarter 1, full year guidance at Macraes is unchanged. With the mill restored to full capacity, the team at Macraes is confident that the adjustments made to the mine schedule will deliver on full year with an improved second quarter and a stronger second half. As you can see in the picture on the lower corner of the slide, Golden Point Underground development is well underway. First production is on track for quarter 4 this year. Progressively, Golden Point Underground will replace production from Frasers Underground. Golden Point Underground along with additional open-pit opportunities at Deepdell, Innes Mills and Gay Tan had will be the primary sources for the Macraes mine life extension to 2028.
Moving on to Slide 11, Waihi produced approximately 4,000 ounces in the first quarter prior to shutdown of the processing plant for replacement of the existing side mill and general maintenance. The new side mill was delivered to site in early April and will be installed before the restart of the plant currently expected in late quarter 2. With the restart, we expect to begin continuously milling of ore from the Martha Underground and deliver 35,000 ounces to 45,000 ounces of gold production this year. Ramp-up of gold production will continue, and we target a production rate of 90,000 ounces to 100,000 ounces per year from the project over the next few years. Development of Martha Underground continues to progress on budget and on schedule. And in our view, this is a producing asset with significant potential upside. During the first quarter, we announced the first resource at Martha Underground of 620,000 ounces of gold grading 4.3 grams per ton. And in 2021, we expect to drill an additional 27,000 meters.
Moving 10 kilometers to the north of Waihi, we continued to believe that Wharekirauponga, our WKP project, represents a promising opportunity within the greater Waihi District. WKP is a major discovery with an indicated resource of 421,000 gold ounces and inferred resource of 717,000 gold ounces grading between 12 grams and 13 grams per ton. And that is all based on 35,000 meters of drilling on the primary – primarily on one of the 3 veins thus far. We expect to deliver an updated prefeasibility study for this project in the second half of this year and continued to define the potential of this high-quality asset.
Turning to Slide 12, we consider Didipio an integral part of our portfolio, and its restart is the key focus for us in 2021. We remain in dialogue with the representatives at national and local levels on the renewal status. Currently, the FTAA is with the Department of Environment and Natural Resources for endorsement to the Office of the President. The current expected time line for resumption to full operations could be up to 12 months post renewal. This is primarily driven by the time required to rehire and re-orientate our workforce, which may also be impacted by the COVID-19. Didipio is currently held in the state of operational standby, poised for transition to full production. Once fully ramped up, Didipio would produce approximately 10,000 ounces of gold and 1,000 tons of copper per month at first quartile all-in sustaining costs.
Now looking to the future, on Slide 13, you will see our key initiatives for 2021. Excellence in ESG and a commitment to responsible mining remains fundamental to the way we do business. We have operated a sustainable business for the past 30 years by applying robust ESG practices across the company, and we know this is critical to ensure we deliver to the communities in which we – to deliver value to the communities in which we live and work. Delivering on our commitments is a core value for OceanaGold. And for us, that means achieving our 2021 production and capital guidance while successfully delivering organic growth. As of the end of the first quarter, we are comfortably on track to achieve both of these measures.
Advancing our organic – robust organic growth projects is a key to delivering shareholder value. And as I stated before, our organic growth projects are on track and on budget with 2 of the 3 new underground mines coming online this year. And as discussed, the restart of Didipio remains a significant near-term catalyst for the company. Didipio has the potential to be a material source of cash flow. It is why we continued to employ a small crew at the site to keep the operation in standby. We continued to invest in the community, and I continue to dedicate a significant portion of my time and effort as CEO to its restart. We look forward to the day we will return to normal operations and can contribute to the Philippines’ COVID-19 economic recovery.
Turning to Slide 14, advancing our organic growth is key to delivering long-term shareholder value, and we are doing this in two geopolitically stable jurisdictions, New Zealand and the United States. As mentioned previously, in the Americas, we are progressing earthworks for Haile Underground and expect to begin the portal development in the second half of this year upon the receipt of the SEIS. The equipment is ordered and the mining contractor has been selected, and the project is on track for first production in quarter 4 of 2022.
Martha Underground underpins the Greater Waihi District as we currently see it. The project is on track for continuous milling to begin late in the second quarter and deliver 35,000 ounces to 45,000 ounces of gold this year. As we develop the Martha Underground project, we continued to invest in the drill bit. The majority of our exploration activities are in New Zealand, where we plan on drilling over 80,000 meters with 10 drill rigs in place this year, 4 of which are currently active at the Martha Underground and 2 at WKP. It’s early days, but we believe the Waihi District represents the largest value creating opportunity we have in our portfolio. Moving to the other island, Macraes’ mine life extension to 2028 is supported by Golden Point Underground and open-pit expansion opportunities, including the Deepdell and layback of existing open pits. Golden Point portal development is progressing on plan and on track for first production in the fourth quarter of this year.
In summary, we are focused on the future and bringing our organic growth online, which we believe is critical to creating shareholder value. OceanaGold is a resilient and dynamic gold miner with a strong and sustainable future. We are excited about our 5-year plan and beyond that delivers increasing margin and real value to shareholders. The acquisition we made at the low point of the gold cycles have created a platform for us to create value through our own organic growth projects.
Thank you for joining us today. And I will now turn the call back to Allysa.
Allysa Howell
Thank you, Michael. Sylvie, we will now transition to Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] And your first question will be from Ovais Habib at Scotiabank. Please go ahead.
Ovais Habib
Hi, Michael and team and thanks for taking my questions. Just a quick 2 questions from me, the first one at Haile, now mill throughput, as you had mentioned, was lower due to some challenges with, I guess, the flow of the saturated saprolite ore to the plant. Now I believe this has been rectified during the quarter. And also, grade was hung in pretty well compared to Q4 coming into Q1. Can you give us a little bit color on – again, just want to double check that this situation with the flow has been rectified. And how do you see kind of grades coming in, in the next couple of quarters? Is it going to be fairly flat or do you see grades kind of tapering off? How do you see the grade profile looking like at Haile?
Michael Holmes
Yes. Thanks Ovais. The – we had fixed and have resolved the problem. We were trying to sort of manage through it and decided to do the redesign of the primary crusher and the apron feeder and the chutes. And we managed to take the opportunity of doing that during the mill shutdown for the reline. So, that’s been resolved now, and plant throughput is back up to the levels that we were forecasting, which is great. And we believe that, that solution is now a long-term solution for the process plant. Yes, the grades, we were able to sort of – as we have done that and with the lower throughput, we were able to sort of put the better grade material through. We will see sort of the grades for this quarter will be relatively flat, but the throughput will be increased. Then there will be a reduction in the grade profile in the third quarter and then a slight increase in the fourth quarter. So, as mentioned before, 60% of our ore production will be really in the first half of the year.
Ovais Habib
Okay. Perfect. Thanks for that. And just another quick question on – then just moving on to Didipio. In regards to the approval, we started off negotiations with the DENR, then the file kind of moved to the Office of the President. Now I believe that file is now back to the DENR. Has there been any changes or any sort of additions, subtractions to any sort of agreements? Is there something that they are working on or any other additional color you can provide as to what’s taking the DENR so long to get approval across the line?
Michael Holmes
Yes. Well, thanks, Ovais. And the frustration for us is the transparency of the timing of the process. But as previously mentioned in some other announcements, we did work with the FTAA Renewal Committee Technical Working Group, which was a combination of the, Mines and Geosciences Bureau, the Department of Environment and Natural Resources and the Department of Finance, and we renegotiated the FTAA terms and conditions. And that sort of happened sort of over the Christmas-New Year break. And now basically, it’s just been going through the verification process and the sign-off process. And so it’s basically now just into the Office of the Secretary of the Department of Environment and Natural Resources, which is the last signature that’s required before it goes to the Office of the President. So through the Technical Working Group, it sort of went through the undersecretaries that were working with us and the directors that were working with us, and then it did go up through the different departments for secretarial sign-offs. And so, we have got that from the Department of Finance. And now it’s just with the, as I mentioned, with the Department of Environment and Natural Resources to the Office of the President. There has been complications within the Philippines with regards to COVID with offices being – government offices being shut. So, that has impacted the timing.
Ovais Habib
Okay. Thanks. Thanks for the color with that Michael. And that’s it for me. Thanks.
Operator
[Operator Instructions] And your next question will be from John Tumazos at John Tumazos Very Independent Research. Please go ahead sir.
John Tumazos
Thank you for taking my question. Which quarter will CapEx peak this year? And presumably, as CapEx falls in subsequent years, production rises, costs fall. What might be a plausible year where net debt would fall to nil? Are we 4 years away? Five years away? We all like you to be strong and well capitalized.
Michael Holmes
Yes. Thanks, John. Scott, I will hand that question to you.
Scott McQueen
I was just [Technical Difficulty], with the microphone there. Alright. John, I hope you are well. Thank you for your question. Capital will peak this year, in the next quarter. We are expecting about 60% of our CapEx in the first half. Third quarter will be similar to the first quarter and the fourth quarter, the lowest CapEx, CapEx remaining on track with our guidance. But you are right there, our plan is predicated on delivering these projects with the peak capital year this year, capital coming down next year. The Martha Underground, the Golden Point going into production, production going up, margins increasing, as you note. I would suspect – expect gold price, depending, of course, John, but expect that we would be targeting to be, as you said, net debt neutral within 3 years certainly. And we will be doing everything to achieve that as soon as we can, delivering on our objectives.
John Tumazos
Thank you. We are all rooting for you.
Scott McQueen
Thanks, John.
Operator
[Operator Instructions] And at this time, it appears that we have no further questions registered. I apologize, we do have a question from Farooq Hamed at Raymond James. Please go ahead.
Farooq Hamed
Hey guys. I thought I would just jump in here with a question. A couple of things, one is at Haile, in your press release, you put out a comment saying, I guess, a bit of a warning that while the guidance is reiterated, it could be adversely impacted by the COVID cases that are going on there. Can you just give us some insights into what you are dealing with in terms of workforce availability? And what would have to happen for you not to be able to maintain guidance at Haile from a workforce perspective?
Michael Holmes
Yes. Thanks, Farooq. I will handle it. I mean the COVID has been managed exceptionally well on site, and we have seen some great reductions of cases. Unfortunately, it’s just had another uptick in the region. But I will hand it over to Jim Whittaker. He should be able to give you a little bit more color on just exactly how he and the team have been managing the situation. Jim?
Jim Whittaker
Yes. Thank you, Michael. And Farooq, thanks for the question. As Michael noted, the numbers have come way down after this first quarter in South Carolina in around Kershaw and Lancaster County as well. They are literally down to the single digits of people that we have off-site either for presumptive cases or for confirmed cases. And so the numbers have come way off. That has helped our ability to plan work and obviously through the reduced absenteeism. We have kept our same policies in place, as we had all the way through last year. We also kept our same policies in place with respect to vacations, which is helping the situation a bit because now we are into the vaccine cycle in the United States, as you may know, and people are taking time off to go for half a day and to make sure they get their vaccine. So, we have really been doing a lot of communications and promoting that to make sure that people are out there and looking for getting the vaccine. With respect to impacts on operations, it’s really more of a cost impact that we saw through last year and some complications with absenteeism, not having people in seats all the time. I think we are through the worst of that. But again, it is kind of a crystal ball. We are hoping that we don’t have this famous third wave that some people are talking about, but what we see through this month is very, very favorable for what we are trying to do with the Haile business plan.
Farooq Hamed
Okay. That’s great. Thanks for that color. And then maybe just to round out that, how are you in terms of your workforce – in terms of filling out your workforce at Haile? Have you kind of reached full complement there?
Jim Whittaker
Yes. We’ve been at full complement for a while. The challenges at Haile, more specifically in the open-pit mining operation over the past year, have been rotation. We’re still doing a lot of work on looking at what we need to do to bring people into the company that want to stay with the company and also working through conduct issues, such as health and safety, which we hold at very high priority. So we’re at full complement. The next steps and actually through the month of May is very critical for the underground group. We have left the contract for the underground contract miner to be able to reduce risk on the schedule. That’s looking very good. But it’s – and indeed, we’re actually going through a hiring cycle right now. It’ll be a very, very busy month in May and into June.
Farooq Hamed
Great. Thanks for that Jim. And then Michael, maybe just one follow-up question on Didipio, kind of an add-on to, I think, Ovais’ original question. It sounded – or I guess when I read the release and just hearing your presentation, it sounded to me that you’re a little more upbeat or maybe even a little more certain about the outcome at Didipio. Am I just reading and hearing things that I want to read and hear? Or is there something you can tell us about how things have gone? I mean it sounds like the Department of Finance has signed off. What – can you give us some color into kind of what the discussions have been with the DENR and what they’re telling you in terms of their willingness to sign off imminently?
Michael Holmes
Yes. Farooq, I think there’s been a couple of changes within the country that we’re seeing in the announcement of the President with regards to sort of mining – within the mining industry within the Philippines and the opportunity they’ve got of advancing that for a COVID-19 recovery. And so there has been some announcements from the President with regards to the open-pit bans and the EO79, Executive Order 79. And there is – and I think that’s an important view for the country, and that – I mean, the Department of Finance and I think quite a few of the other departments, the DENR, have been working with the different departments to sort of move that forward. I think from our point of view, when you look at the Technical Working Group, it was made up of the different departments, and they’re all sort of quite happy with what we’ve done with the renewal. And it’s just a matter of just going through the process of sign-off. And so as we’ve been going through the process of sign-off, we’ve sort of had seen the Department of the Mines and Sciences Bureau directors come out with some positive sort of statements within the Philippines press as well as the direction of the President with regards the mining industry within the country. So look, again, we don’t have a clarity on the time frame. For us, it’s something that we’ve never had. And that’s been one of the most frustrating things that we’re still dealing with. But we believe sort of we’ve done – and the technical working group with us have done what we’ve done, and it’s now just sort of to the finish point with the Department of Environment and Natural Resources before it then goes to the Office of the President.
Farooq Hamed
Okay. Okay. Thanks for that. Thanks guys, these are helpful. I appreciate it.
Operator
Thank you. [Operator Instructions] And currently, we have no further questions registered. Please proceed.
Allysa Howell
Thank you, operator. We do have a handful of questions that have been submitted online. We’ll start with the first question for our management team. Question one, will the presold ounces from last year be accounted for in the second quarter 2021 at $1,925 per ounce or thereabouts?
Scott McQueen
Thanks, Allysa. I’ll take that one. Yes, I will. The presale ounces were – the cash was received and the revenue was put on the balance sheet. That unwinds through the P&L as revenue at about – at $1,920 as we deliver those ounces across [Technical Difficulty] few months.
Allysa Howell
Okay. Thank you, Scott. Second question, at what share price would you look at doing buybacks?
Michael Holmes
Yes. Look, thanks, Allysa, I think at the moment, we’re sort of focused on our organic growth. And so the free cash that we’ve got in the balance sheet and the way we set up the business through last year and beginning of this year is all going back into the organic growth, which we see as the long-term value for the shareholders. I think the question when Didipio comes back online and we do get that free cash flow generation, it’s just – it’s how we then sort of utilize the cash flow from that and what’s the best way of doing that. And we will review that once Didipio comes back online.
Allysa Howell
Thank you, Michael. The third question, turning to Didipio, assuming you get the FTAA renewed you won’t have any production for up to 12 months. Is that correct?
Michael Holmes
Yes, thanks. Listen. No, that is not correct. So Didipio, we’ve still got concentrate currently on the ground. So we will be trucking the concentrate out. Total value of that is around $50 million to $55 million worth of concentrate on the ground. And we’ll get to the payment for that within up to 6 weeks, that 90% payment of that in the first 6 weeks. And then the remainder will come as we finalize the assays. It’ll take a period of sort of 2 to 3 months to get the processing plant and the people reemployed and trained back up to get the processing plant back up and running. And we will then be utilizing the stockpile, the 90 million tons of ore stockpile we have to start feeding that process plant. And that will then assist with the delivery of tailings for the Phase 2 plant, but we’ll be supplementing that as we sort of ramp up. What we are saying when we are up to 12 – production up to 12 months, that’s production at the full rate. And so we are actually ramping up production to 1.6 million tons. So it’ll take us about 12 months to get back up to that full production rate of 1.6 million tons from underground. And of course, that gets supplemented through the process plant, where we mill about 3.8 million tons. So there’s another 2.1 million, 2.2 million tons that comes from the stockpile that gets put in there. So initially, it will be processing the lower-grade stockpiles, and then we’ll continue to feed the underground ore as we ramp up the underground to the 1.6 million tons, which will take up to 12 months.
Allysa Howell
Great. Thank you, Michael. Our final question of the day is what is your working capital cost with Didipio’s start-up?
Michael Holmes
That’s – it’s – basically, the – Didipio was cleared out from underground, and so the start-up costs aren’t that great. The working capital should be around that $3 million to $5 million for the start-up. It’s more about the employment of the people and the training of the people. We’ll have the concentrate, as I said, that’ll be sold within the 6 weeks. We’ll move that offsite until that. So that should be positive cash of around about $50 million to $55 million and then – as we ramp up the process plant and then get the operation into full production.
Allysa Howell
Okay. Thank you, Michael. And I was mistaken, we have one more question. And that is, can certain capital expenditures be delayed or deferred if liquidity declines? And if so, at what gold price will you consider deferments?
Scott McQueen
I’ll take that one and [indiscernible], Michael.
Michael Holmes
I’m thinking about that, yes.
Scott McQueen
Yes. The organic growth projects can be deferred, but our priority is to deliver on the optimal time lines. And that’s the way we set up our balance sheet, with that intent. And 2021 is our peak capital investment period. And when we set our plans in 2020, it was at a record-high gold environment with a very bullish outlook on [Technical Difficulty] But that said, our plans for this year was set at [Technical Difficulty] gold prices, and we started the year with $205 million or so in liquidity. And we set up our balance sheet expecting [Technical Difficulty] and expecting softer gold prices. And at current prices, that drawdown could be circa $125 million, but we’re still in a good position. And gold price is $100. Either way, it’s about $30 million, and we have levers in our control. But – before, we would look at timing of those projects in terms of additional short-term cash flow [Technical Difficulty] prepayments or additional [Technical Difficulty] and debt options, etcetera. So we’ve got options on the table, and we’re well positioned to manage [Technical Difficulty] should the gold price drop. But the average is $1,793 for the first 5 months, and we continue to monitor that closely. Priority is to deliver those growth projects on the optimal time line.
Allysa Howell
Thank you, Scott. That is our final question of the day and concludes our webcast and conference call. A replay will be available on our website later today. And on behalf of Michael, Scott and the rest of the team thank you for joining us. Bye for now.
Operator
Thank you. Ladies and gentlemen, this does indeed conclude your webcast and conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.
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