PriceSensitive

OceanaGold arranges $78M prepaid gold sale

Mining
TSX:OGC
27 February 2020 10:31 (EDT)
OceanaGold Corp., - President and CEO, Mike Wilkes

Source: The Australian

OceanaGold Corp (TSX:OGC) is entering into a forward gold sale valued at C$78.5 million.

In exchange, OceanaGold Corp will deliver 48,000 ounces of gold to the buyer between September and December of this year.

This is a substantial pre-sale, representing almost a third of the company’s predicted output for the quarter.

A forward sale arrangement allots a prepaid amount of gold to a buyer at a fixed rate. This is opposed to an ounce-by-ounce arrangement, which may be impacted by the changing gold spot price.

The company arranged the sale with the help of their current banking group, which consists of Scotia Bank, Commonwealth Bank, Citibank and BNP Paribas.

The motivations for the prepaid sale are twofold. Firstly, due to economic uncertainty over the past weeks, safe-haven investments, like gold, have performed very well.

Consequently, this has increased the current gold spot price and OceanaGold is eager to take advantage of the inflated rate.

Secondly, OceanaGold expects its annual gold production to be stronger in the second half of the year. By arranging this deal now, the company can more evenly distribute its cashflow across all quarters.

The increased cashflow will assist in expansion of two mining operations in New Zealand and the U.S.

In light of these circumstances, Mick Wilkes, President and CEO of OceanaGold, believes this is a good deal for the company.

“It is an attractive option at today’s high gold prices that mitigates the need for any material refinance of debt or equity issuance.

“We will continue to take prudent steps that ensure our operating cash flow matches and supports the critical timelines associated with our growth projects,” he said.

The resulting payment will be included in this quarter’s operating figures.

OceanaGold Corp (OCG) is up 1.48 per cent, wish shares trading for $2.75 at 10:17am EST.

Related News