Oceana Gold's production guidance is encouraging in that
it shows its cash costs are falling, Forsyth Barr broker Peter
The East Otago and Reefton gold-miner last week issued new
guidance and confirmed it had raised equity capital.
In the changes, Forsyth Barr had lifted its 2013 full-year
operating earnings forecast 1% to $US274.3 million ($NZ334.6
million) and reduced the target share price by NZ70 cents per
share to $NZ4.40. It left its buy recommendation unchanged.
Mr Young said the production guidance provided by the company
was close to expectations and resulted in only minor changes
to the Forsyth Barr forecasts.
Gold production was expected to be in the range of 285,000
ounces to 325,000 ounces and copper production between 15,000
tonnes and 18,000 tonnes.
''We have lowered our New Zealand gold production forecast by
11,000 ounces to 245,000 ounces as, given Oceana Gold's
recent track record with guidance, we want to take a more
However, Forsyth Barr had raised its copper production
forecast so that it was in line with Oceana Gold's Didipio
gold production in the Philippines, he said.
Oceana Gold forecast cash costs of between $US650 and $US850
an ounce - assuming a US80c cross rate and a $US3.40-a-pound
''In our view, the exchange rate assumption is optimistic
based on current spot rates, and the copper price is
conservative. Given the uncertainties with the first year of
Didipio production, Oceana Gold had indicated it will reissue
guidance at the end of the first quarter.''
In a slightly curious move - in that it was not strictly
speaking necessary - Oceana Gold raised $C90 million
($NZ110.5 million) by issuing 30 million shares, Mr Young
said. The decision to raise extra equity had seen Oceana Gold
reduce debt levels, bringing it more in line with its peers,
none of whom had significant debt.
In the past month, the gold price had fallen from $NZ2100 an
ounce to $NZ2000 an ounce. That had seen gold index and
market multiples fall 10%. The equity raising had also had a
dilutionary effect. Those factors had combined to cut Forsyth
Barr's target price to $4.40, although that was still a
return of more than 30%, he said.
Oceana Gold continued to trade at a 25% discount to its peers
because of high cash-cost production. Gold cash costs were
moving lower because of Didipio copper by-products credits.
Mr Young expected the company's discount to its peers to
close during 2013.