OceanaGold: Future-Proofing Growth
By Lance Kawaguchi, Managing Director, Global Head – Corporates, Global Liquidity and Cash Management, HSBC
At HSBC, we partner with our clients across industries and markets, with an extensive on-the ground network of senior bankers with an in-depth understanding of their sectors. The following is a client example of our partnership in the Natural Resources, Utilities and Chemicals sector. As a global business that is growing quickly, multinational gold producer OceanaGold needs a scalable, flexible, cash management and liquidity investment infrastructure.
So, when a reshuffle in its banking group triggered the decision to select a new primary cash management bank, OceanaGold chose HSBC.
In mid 2012, OceanaGold refinanced its debt facilities and reviewed its banking relationships. At the time, the company had mining operations in New Zealand and was constructing a mine in the Philippines, managed from its headquarters in Melbourne, but further international expansion was already in prospect. The company therefore decided to put out a formal tender for a new global cash management provider.
The tender process started in September 2012 and concluded in February 2013 when OceanaGold announced that it was awarding its cash management mandate to HSBC. A number of factors played into this decision, one of which was banking platform consistency. “We were previously having to use two different cash management platforms from the same provider, which was challenging,” says Matthew McConnell, OceanaGold’s Group Treasurer. “The two systems weren’t compatible and required separate login credentials and tokens, so the global consistency of HSBCnet was appealing. In addition, we had received positive feedback on HSBCnet from our Philippine operations where it was already in use.”
A single global cash management partner would also streamline day to day treasury operations. This was particularly relevant in view of the company’s ongoing expansion, as considerable efficiencies and cost savings could be achieved if future acquisitions did not result in the proliferation of banking relationships. A banking partner such as HSBC, with a global footprint that could support likely future OceanaGold acquisitions, would minimise the risk of this.
Finally, OceanaGold maintained various cash balances across its businesses, including one in Philippine peso (PHP). Therefore, a banking partner that could offer interest compensation that reflected the level of all balances globally – including PHP – would be adding value.
HSBC’s Interest Enhancement Facility (IEF) met this criterion. IEF enables clients to obtain preferential credit interest rate terms on global balances. As mentioned above, this was particularly pertinent for OceanaGold in view of its operations in the Philippines and its PHP balances there. In addition, the company held USD from its gold sales, as well as NZD, AUD and CAD.
“The IEF was a neat solution for our needs,” says Matthew McConnell. “Its notional nature is a better fit for us in terms of flexibility than a solution involving physical movement of cash and also incurs less management overhead from a treasury perspective. We also like the fact that it enables us to make the best use of any float we have, while simultaneously maximising yield.”
Client profile: OceanaGold
OceanaGold Corporation is a mid-tier, multinational gold producer. Over the years, the company has built up extensive global operating and development experience in low-cost production. OceanaGold owns a portfolio of geographically diverse, high-quality assets in the Philippines, New Zealand and the USA.
The company has a strong commitment to sustainability and has operated in accordance with this for more than a quarter of a century, in doing so building a strong reputation for responsible environmental management and community engagement. It works collaboratively with valued stakeholders to identify and invest in social programs that are designed to build capacity beyond a mine’s life cycle.
The company’s most recent acquisitions have been the high-grade Waihi Gold Mine on New Zealand’s North Island and – through the purchase of Romarco Minerals – the top-tier Haile Gold Mine in South Carolina, USA. In October 2017, the company announced the declaration of commercial production at Haile.
OceanaGold has a significant pipeline of organic growth and exploration opportunities within the Asia-Pacific and Americas regions and has also made strategic investments in two junior exploration companies – Gold Standard Ventures and NuLegacy – both focused on projects in Nevada, USA.
The implementation, which involved incorporating OceanaGold bank accounts globally into an IEF structure, was successfully completed in early 2014. A key element in the implementation’s success was that HSBC’s implementation manager was based in the company’s head office location of Melbourne.
This proved to be of considerable value as the implementation progressed. A common issue in sectors such as natural resources and utilities (NRU) is that the often globally dispersed nature of the business can make global banking implementations a major headache for corporate treasuries. A global treasury based in the head office location finds itself having to monitor and manage implementation activities in remote locations and time zones.