OGP extends gold supply contract with BSP

OceanaGold Philippines [OGP 15.96 ?1.5%; 60% avgVol] [link] said that it extended its gold supply agreement with the BSP for an additional three years (until March 2028). Under the agreement, OGP must sell at least 25% of its “gold doré” production to our central bank. Gold doré is what OGP can produce at its mining site after light refining. It’s a mix of mostly gold (usually 60-90%), combined with other metals like silver, but it’s not at the level of purity and consistency that a 99.5% pure “good-delivery” bar that bullion dealers would trade. The BSP purchased 29% of OGP’s gold dore production in 2024, up from 28% in 2023 and 27% in 2022.

  MB BOTTOM-LINE:  OGP must sell at least 25% of its gold dore production to the BSP under the terms of its concession agreement (the “FTAA”), so this extension is both immensely important to OGP’s continued compliance with its franchise agreement, but also irrelevant OGP’s performance. While I’ve not read the agreement itself to confirm, sources seem to imply that it’s materially the same agreement that OGP had before with the BSP, just now extended until 2028. This extension reduces a source of potential political risk, though, as the non-extension of this agreement in 2028 is a potential angle of attack against OGP. I don’t say this to spread FUD. I just say this as a trader who watched first-hand as Duterte weaponized the franchise renewal process for populist political purposes. To me, these sales are probably more like a tax that is paid by OGP to the BSP, so while I am relieved to see the extension, I don’t think it’s something that improves OGP’s sales prospects for the coming year. It’s the same.  

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