OceanaGold's Record Margin Signals Resilience, But Labor Costs Loom

Q2 2026: 61% EBITDA margin, strong free cash flow, and growth projects on track despite cost pressures.

OGC.TO · Earnings Call · 2026-08-06

A Record Quarter, Anchored in Execution

OceanaGold delivered a strong second quarter, reporting a record adjusted EBITDA margin of 61% despite the pullback in gold prices from Q1's all-time highs. “Our margins remain strong. Even with the pullback from the record high gold prices of the first quarter, the second quarter delivered a record quarterly adjusted EBITDA margin of 61%.” — Gerard Michael Bond, President and Chief Executive Officer · 2026-08-06 Production rose 7% sequentially to ~139k ounces, and “We safely and responsibly delivered 7% more gold than we did in the first quarter, We continued to generate strong free cash flow.” — Gerard Michael Bond, President and Chief Executive Officer · 2026-08-06 That free cash flow of $130M funded growth projects and still allowed the company to add $35M to the balance sheet.

Cost Inflation: The Overhang and the Hedge

The company is navigating a rising cost environment, with labor cost inflation as the largest driver. Management cited Haile's exposure to US labor rates, compounded by contractor costs. The CFO noted, “We hedge approximately 80% of our diesel requirements at both Haile and Macraes.” — Marius van Niekerk van Niekerk, Chief Financial Officer · 2026-08-06 This hedge is a buffer against geopolitical shocks, such as the Iran conflict, which has not yet disrupted operations. But the AISC for 2026 is expected to sit near the upper end of guidance, reflecting the inflation in labor, maintenance, and diesel. The pressure was already flagged in February, when the CFO noted “a big part of our cost base is labor. Cost labor cost inflation is real.” — Marius van Niekerk, Chief Financial Officer · 2026-02-19

Growth Projects: Waihi North and Beyond

Investment in future capacity continues to progress. The Waihi North project reached a key milestone with the portal opened and decline development underway, now nearing 200 meters. Decline development toward the high-grade ore body is on plan, with the second jumbo expected to start twin tunnels shortly. At Haile, record monthly mill throughput was achieved in June, a result of prior reliability investments. Mill throughput is expected to stay elevated, supporting higher production in H2. Exploration is also being stepped up, with more rigs at Wharekirauponga and Didipio, underscoring the company's commitment to organic growth.

Capital Allocation and Outlook

OceanaGold's capital allocation framework is working as intended: the first half saw near-even split among sustaining capital, growth capital, shareholder returns ($174M returned), and cash build ($178M added). The company remains on track for full-year guidance, with Q4 expected to be the strongest quarter. Management's strategy is to keep investing in high-return projects while returning upside to shareholders. As management previously stated, “the drivers of that uplift definitely carry through into '26” — Gerard Bond, President and Chief Executive Officer · 2025-11-07, reinforcing confidence in the growth trajectory.

We safely and responsibly delivered the plan, remain on track to meet guidance, while generating record adjusted EBITDA margins and strong free cash flow.
Gerard Michael Bond, President and Chief Executive Officer · 2026-08-06