Oceana Gold has tentatively forecast record gold production
for the calendar year 2013, underpinned by its gold and
copper development mine in the Philippines which is less than
a year away from beginning production.
Oceana, along with most other major gold producers, saw its
share price undermined during the past fortnight by the
decline in global spot gold prices which went below $US1600
($NZ2133) to $US1573 yesterday.
Oceana's share price during the past seven trading days is
down more than 18%, having fallen from $3.38 to about $2.76
yesterday, with market capitalisation declining from $NZ887
million to $NZ724 million.
While Oceana has ramped up overall exploration funding,
increased its resource estimates and is portraying confidence
in the Didipio development, management is putting itself
under increasing pressure to deliver results to the market
soon.
Oceana chief executive Mick Wilkes, in separate market
updates released this week, reiterated expectations of Oceana
delivering 230,000-250,000 ounces of gold from New Zealand
operations this year, but raised the production bar to
300,000-350,000 ounces for 2013, which would include about
70,000 ounces from the Philippines.
Crucial to operations and profitability, cash costs of
production per ounce this calendar year are expected to be
$US900-$US980 per ounce.
For 2013, with the Didipio operation in the northern
Philippines under way, Mr Wilkes said operating costs should
move below $US500 per ounce.
He remained confident Oceana could achieve a target of
producing 600,000 ounces a year by 2016 from all operations.
On the question of declining market capitalisation, Mr Wilkes
said investors would soon realise Didipio would bring a
"significant transformation" to Oceana.
"The current market capitalisation reflects little to no
value for Didipio as we execute on our strategy to build it
and establish a platform for growth in the region," Mr Wilkes
said in a statement.
In his Didipio update, Mr Wilkes said 480 construction staff
were on site, plus management. About $10 million per month
was being spent and exploration of adjacent prospects would
accelerate next year. Production was scheduled to begin in
the fourth quarter.
Craigs Investment Partners broker Peter McIntyre said while
Oceana's New Zealand operations stood out for the year,
Didipio as a new operation still carried risks.
He said Mr Wilkes had clearly outlined operational
expectations and where he saw value in company operations,
but he had "drawn a line in the sand", for the market and
investor expectations.
While gold was usually a safe haven in turbulent economic
times, investors had been taking profit from recent highs and
it was possible some of the euro-zone countries, many of
which were historic holders of large amounts of gold, were
selling stocks to assist in shoring up their faltering
economies.
simon.hartley@odt.co.nz
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