Oceana shares fall following Canadian capital raising

A ball mill shell arrives by ferry at Port Irene on Luzon island in the Philippines for transport to Oceana Gold's gold and copper Didipio project, earlier this year. Photo supplied.

Shares in East Otago gold miner Oceana Gold have plunged more than 15% in the past three weeks, since it raised $114 million in Canada, having sold 30 million shares to a syndicate of underwriters earlier in the month.

Commissioning of Oceana's Didipio gold and copper mine on the northern Philippine island of Luzon was unaffected by typhoon Bopha, which swept through the main southern island of Mindanao this week, killing more than 700 people and leaving 900 still missing.

Oceana announced the Canadian capital raising on December 4, but its shares subsequently plunged 16% from $4.10 to trade around $3.45-$3.50 yesterday.

From a year-low of $2.27 in mid-May, Oceana shares hit a high of $4.50 in late October, before the start of the slump in early December.

At the time of the Canadian capital raising, Craigs Investment Partners broker Peter McIntyre had cautioned about the likelihood of a share dilution and loss of value with the issuing of 30 million shares about to go to market.

The securities will be offered in each province of Canada by the purchasing syndicate, with the exception of Quebec, in short form prospectus, and possibly in Australia, but on a private placement basis.

Oceana has said the Canadian cash raised would be used to reduce outstanding debt and provide balance sheet and operating flexibility.

Mr McIntyre said yesterday the share dilution, softening of the global gold price, a weak US dollar, Federal Reserve fiscal stimulus and profit taking had all combined to undermine the share price.

Gold prices had waned in the face of some ''relatively good news'' in recent days on the fiscal cliff being faced by the United States on January 1, when taxes are legislated to go up and public sector spending is to be cut.

''Oceana stock has captured attention, not just investors, but globally as it's now one of the largest producers in Australasia,'' Mr McIntyre said.

However, that popularity and a rising price meant some investors during the past year would be taking the opportunity to take their profit from the rising value.

Oceana has forecast increasing cash flows from its four operating mines: two at Macraes in East Otago, Reefton on the West Coast and Didipio in the northern Philippines, which is being commissioned and is due to produce concentrate by next month.

simon.hartley@odt.co.nz