OceanaGold Corp (OTCMKTS:OCANF) – An Opportunity on the Shakeout?

OceanaGold Corp (OTCMKTS:OCANF) – An Opportunity on the Shakeout?


OceanaGold Corp (OTCMKTS:OCANF) is a low-priced, highly volatile name in the precious metals space that has started to see some interesting action. Attention is picking up on the downside as the Philippines Department of Environment and Natural Resources named the Company as one of 23 miners that may be forced to suspend local operations due to social concerns.

The Company has stated that it has not received a formal notice and has received numerous commendations for its practices as a miner at its critical Didipio Gold-Copper Mine. The news has sent OCANF shares sharply lower about 14% in recent days for a high-volume test of its 200-day simple moving average.

OceanaGold Corp (OTCMKTS:OCANF) bills itself as a mid-tier, low-cost, 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 constructing the Haile Gold Mine, a top-tier asset located in South Carolina along the Carolina Terrane.

The Company expects the Haile Gold Mine to commence commercial production in early 2017. OceanaGold also has a significant pipeline of organic growth and exploration opportunities in the Australasia and Americas regions.

The Company has a strong social license to operate and works collaboratively with its valued stakeholders to identify and invest in social programs that are designed to build capacity and not dependency.

In 2016, the Company expects to produce 385,000 to 425,000 ounces of gold from the combined New Zealand and Didipio operations and 19,000 to 21,000 tonnes of copper from the Didipio operation at All-In Sustaining Costs of US$700 to US$750 per ounce.

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According to a recent statement, the Company will consider all avenues, including working collaboratively with the DENR, to facilitate the immediate resolution of this matter to ensure no disruption to our operations and our valued local workforce.

Mick Wilkes, President and CEO said, “We pride ourselves, and have been recognized on numerous occasions, for being a responsible mining company with a long history of operating to the highest industry standards on health, safety, environment, community and sustainability. We are disappointed with the statements made earlier today and will seek clarification and reconsideration from the DENR to further understand and rectify this matter in short order.”

Mr. Wilkes added, “The Didipio Mine has a strong social license to operate. Our achievements since recommencement of construction in 2011 would not have been achieved without our steadfast commitment to the community and most importantly the strong endorsement from the residents of Didipio and the nine other communities in the provinces of Nueva Vizcaya and Quirino.”

We would suggest keeping a close eye on this stock as sentiment is sharply leaning to the South, which can create opportunities in the opposite direction should the regulatory scandal resolve itself without significant damage to operations.

Macro forces may end up propelling the price of gold and silver higher as central banks continue to favor extremely accommodating monetary policies throughout the developed world, even as wages and monetary velocity gradually tick higher.

There are also numerous geopolitical scenarios hovering in the near future that imply potentially bullish contexts for precious metals, particularly as the EU heads into several political events over the next six months that parallel what we saw in the UK in June.

Italy, France, and Germany all have upcoming decision points with sentiment on the EU faring particularly poorly. A breakup of the union would likely be a powerful catalyst for gold and silver.

Currently trading at a market capitalization of $1.8 Bln, OCANF has a significant war chest ($103.77M) of cash on the books, which compares with an appreciable load ($227.80M) of total accumulated debt. This is not a daunting balance sheet problem when one considers the level of top line performance in the Company’s recent reporting, including roughly $585 mln in TTM revenues growing at over 30% year on year. The regulatory uncertainty implies tremendous risk, but may ultimately resolve itself favorably. It will be important to track, particularly as it has already clearly shaken out a number of a larger, but weaker handed investors and aided in a significant 30% correction in share prices even as revenue growth continues at a very high level. For continuing coverage on $OCANF and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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