Mr. Mick Wilkes reports
OCEANAGOLD HAILE OPTIMISATION STUDY DELIVERS ENHANCED VALUE
Oceanagold Corp. has completed the Haile optimization study where results demonstrate enhanced value through upgraded mineral reserves, increased annual gold production, longer mine life and robust economics.
All financial figures are in U.S. dollars unless otherwise stated.
Key highlights:
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Increased proven and probable gold reserves by over 70 per cent from 2.02 million ounces to 3.46 million ounces;
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Announced a maiden reserve on the Horseshoe deposit of 440,000 ounces;
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Revised mine plan that includes larger open-pit operations for a 16-year mine life and an underground operation at Horseshoe for a six-year mine life;
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Planned expansion of the process plant from three million tonnes per year to four million tonnes per year to support higher mining rates and increased annual production;
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Robust economics with undiscounted pretax cash flows of $1.4-billion based on current reserves plus an additional $400-million of undiscounted cash flows inclusive of total current resources;
- Further extensional and stand-alone exploration potential to increase value and mine life.
Mick Wilkes, Oceanagold president and chief executive officer, said: "The solid economics of the Haile optimization study clearly demonstrate what we have long believed to be the inherent value of this top-tier asset in South Carolina. Mineral reserves have now increased over 70 per cent from original estimates, supporting increased annual production while increasing mine life to at least 16 years. The maiden reserve at the Horseshoe deposit of 440,000 ounces and a larger open-pit operation within our existing land package is a positive outcome.
"We expect significant cash flow generation from Haile where the study has determined $1.4-billion in undiscounted pretax cash flows on current reserves only and $1.8-billion including total current mining inventory."
He added: "Very shortly, we will commence the permitting process and work closely with the regulator and all stakeholders to advance the Haile expansion project to construction. In the meantime, we continue to ramp up operations and drill targets at depth and along strike to further add to the already significant resource base. These targets include Palomino and beneath the Snake pit both of which were not included in the study and represent potential additional value of the asset."
Revised mineral resources and reserves
Proven and probable reserves have increased over 70 per cent from previous estimates to 3.46 million ounces of gold. Following a successful resource definition drill program on the upper portion of the Horseshoe deposit in 2016, the company is pleased to announce a maiden reserve of 440,000 ounces for the Horseshoe underground, which also has a total inferred resource of 200,000 ounces.
The company has revised the mine plan and design of the surface operations. Pit optimizations were run on a $1,300-per-ounce gold price assumption with a $1,150-per-ounce gold price shell selected for pit design (previously $950-per-ounce gold price). This has resulted in larger pits with the total open-pit reserves now standing at 3.02 million ounces of gold.
UPDATED HAILE
Project Cut-off Proven Probable Proven and probabale
area mt Au g/t Au moz mt Au g/t Au moz mt Au g/t Au moz
Haile open pit 0.45 g/t Au 7.55 1.97 0.48 47.5 1.66 2.54 55.0 1.71 3.02
Haile underground 1.50 g/t Au 3.12 4.38 0.44 3.12 4.38 0.44
Total 7.55 1.97 0.48 50.6 1.83 2.98 58.2 1.85 3.46
HAILE MEASURED AND INDICATED RESOURCES
Project Cut-off Measured Indicated Measured and indicated
area mt Au g/t Au moz mt Au g/t Au moz mt Au g/t Au moz
Haile open pit 0.45 g/t Au 7.06 1.97 0.45 52.2 1.63 2.73 59.2 1.67 3.17
Haile underground 1.17 g/t Au 2.71 5.68 0.49 2.71 5.68 0.49
Total 7.06 1.97 0.45 54.9 1.83 3.22 61.9 1.84 3.67
HAILE INFERRED RESOURCE
Project Inferred resource
area Cut-off mt Au g/t Au moz
Haile open pit 0.45 g/t Au 11 1.4 0.49
Haile underground 1.17 g/t Au 1.2 5.0 0.20
Total 12 1.7 0.69
Reserves are reported within mine designs based
on $1,300-(U.S.)-per-ounce gold price assumption.
Estimates of contained metal do not make
allowances for processing losses.
Resources are reported inclusive of reserves.
Mineral resources that are not ore reserves do
not have demonstrated economic viability.
The open-pit resource is reported within a
$1,500-(U.S.)-per-ounce optimized shell.
The underground resource cut-off grade is based
on $1,500-(U.S.)-per-ounce gold price.
All figures are rounded to reflect the relative
accuracy of the estimates.
Revised Haile mine plan
With the larger open pits and inclusion of an underground operation at Horseshoe, the company has revised the overall mine plan. Following completion of construction of an underground operation and expansion of the process plant, ore feed will be sourced at a rate of 3.3 million tonnes per year from surface operations and 700,000 tonnes per year from underground. The open-pit operations currently have a mine life of 16 years while the Horseshoe underground has a mine life of six years.
The larger open pits necessitate the need for additional tailings and waste capacity including the addition of a new PAG cell; however, the revised design is within the company's existing land package.
MINING PHYSICALS (BASED ON RESERVES ONLY)
Mine production Value Units
Open pit
Ore 55.0 mt
Waste 481.2 mt
Strip ratio 8.7:1 waste:ore
Average gold grade 1.71 g/t
Contained gold 3,018 koz
Underground
Ore 3.1 mt
Average gold grade 4.38 g/t
Contained gold 439 koz
Combined
Total ore 58.2 mt
Total waste 481.2 mt
The Horseshoe deposit will be accessed from a portal originating from the north wall of the Snake open pit, where the company recently commenced mining ore, four months ahead of schedule. The mining method for Horseshoe will be long-hole open stoping at a rate of 700,000 tonnes per year from a single access and backfilled with cemented rock fill. Mining costs are estimated to range between $35 and $40 per tonne mined. The company expects first ore from the underground in 2021 with preproduction development capital costs estimated to be $55-million (excluding preproduction operating cost).
Once underground, the company will develop exploration drives to further drill the Horseshoe deposit at depth and carry out additional and more comprehensive fan drilling of nearby underground target Palomino and mineralization beneath the Snake pit.
Process plant
The study has identified an opportunity to expand the process plant from three million tonnes per year to four million tonnes per year to support the higher overall mining rate. With the company ramping up and fine-tuning the process plant over the course of 2017, the study has used a conservative approach to estimate the additional plant required to achieve the higher throughput rate. The company does expect to identify opportunities to reduce its upgraded plant to achieve the higher throughout rates which would then in turn reduce capital costs. The current estimated capital cost to upgrade the process plant is $67-million.
Haile optimization study economics
The results of the study have demonstrated robust economics with undiscounted pretax cash flows of $1.4-billion based on current reserves only plus an additional $400-million inclusive of total current mining inventory.
The capital cost associated with the preproduction development of the Horseshoe underground is estimated to be $55-million, while the initial capital cost associated with a larger open pit and associated mining infrastructure is expected to be $132-million, which includes $60-million allocated for upgrading the mining fleet. The expansion of the process plant to four million tonnes per year is estimated to be $67-million with potential costs savings identified as the plant is currently ramping up. Overall sustaining capital cost is expected to be $245-million over the 16-year mine life.
Operating costs for surface operations are expected to reduce to between $1.45 to $1.55 per tonne mined while underground mining costs at Horseshoe are expected to range between $35 and $40 per tonne milled. Processing costs are expected to remain unchanged at $10 to $11 per tonne milled.
CAPITAL COSTS
Description Initial capital ($M) LOM sustaining capital ($M) Total ($M)
Open pit $67 $75 142
Underground 55 26 81
Process plant 67 25 92
Site infrastructure 65 119 184
Total 254 245 499
Over the course of the coming months, the company will release an updated National Instrument 43-101 technical report in relation to the updated mine plan and design at Haile. Furthermore, the company will prepare the permitting application for the larger open pit, underground mine, associated infrastructure and expanded process plant. The company expects the start of underground development in 2019 with first underground ore processed in 2021.
About Oceanagold
Corp.
Oceanagold is a mid-tier, high-margin, multinational gold producer with assets located in the Philippines, New Zealand and the United States. The company's assets encompass its flagship operation, the Didipio gold-copper mine located on the island of Luzon in the Philippines. On the North Island of New Zealand, the company operates the high-grade Waihi gold mine, while on the South Island of New Zealand, the company operates the largest gold mine in the country at the Macraes goldfield, which is made up of a series of open-pit mines and the Frasers underground mine. In the United States, the company is currently commissioning the Haile gold mine, a top-tier asset located in South Carolina.
Technical disclosure
The updates of proven and probable reserves have been verified by, are based on and fairly represent information compiled by or prepared by J.G. Moore and B. van Brunt. Mr. Moore and Mr. van Brunt are full-time employees of Oceana Gold (New Zealand) Ltd. and Haile Gold Mine Inc., respectively. Mr. Moore is a member and chartered professional with the Australasian Institute of Mining and Metallurgy. Mr. van Brunt is a fellow of the Australasian Institute of Mining and Metallurgy. All such persons are qualified persons for the purposes of NI 43-101 and have sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity which they are undertaking to qualify as a competent person as defined in the JORC code.
Mr. Moore and Mr. van Brunt consent to inclusion in this public release of the matters based on their information in the form and context in which they appear.
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