East Otago-based Oceana Gold has bought a Central
American gold and silver mine exploration company for $12.1
million in a cashless share transaction.
While the acquisition is seen as positive cashless outlay
offering ''reasonable value'', Oceana's operations in New
Zealand and the northern Philippines remain under review as
it seeks to rein in operational spending, having made $125
million in savings so far.
Up to 260 jobs in Reefton on the West Coast could be axed if
Oceana goes ahead with plans to mothball the Reefton open pit
mine in 2015, while no release has been made on operations at
Macraes in East Otago or its gold-copper Didipio mine on
Luzon Island in the Philippines.
Toronto-listed Oceana already owned 19.98% of Toronto-listed
Pacific Rim Mining Corp - just below the takeover threshold -
and has completed the 100% acquisition by issuing 6.76
million new Oceana shares to Pacific Rim's shareholders -
valued at $C10.2 million, ($NZ12.1 million).
Pacific Rim has been exploring the El Dorado prospect 71km
north east of capital San Salvador, finding an estimated
indicated resource of 1.43 million ounces of gold
equivalents, the silver component having been adjusted to
Oceana shares have been the worst-performing New Zealand
stock this year. The shares have slumped 70% from a year high
of $4.50 last October to $1.34 in June and traded down 3c to
$1.68 yesterday, on light volumes, following the
While Oceana appears to have bought into a dispute with the
El Salvador Government, which has declined to issue a
decision on mining permits, prompting a compensation claim,
brokers at Craigs Investment Partners and Forsyth Barr are
unfazed by that issue.
Craigs broker Peter McIntyre said the acquisition was
''relatively positive'', well-timed and a ''good strategic
move'' by Oceana.
''Doing nothing was not an option for Oceana. This
[acquisition] strengthens its overall portfolio and shows it
is looking into the future.''
It had the potential to extend Oceana's overall mining life
and the El Dorado prospect provided some diversification,
being in part a silver mine, Mr McIntyre said.
Forsyth Barr broker Andrew Rooney said the El Salvador
project had estimated gold reserves of 500,000oz and
estimated silver reserves of 3.1 million ounces.
El Dorado's estimated reserves were about one-sixth of
Didipio in the Philippines and the project was one-third the
size of Didipio, he said.
''This is a small positive for Oceana. In effect they've been
able to acquire an option for no cash outlay, but at a
reasonable value,'' Mr Rooney said.
Both brokers noted Oceana overcame political issues with the
Philippine Government in getting Didipio from development to
production, and were confident that experience could overcome
the difficulties arising with El Salvador's Government and
the present arbitration proceedings.
Oceana is touting the acquisition as a ''high grade
gold-silver resource located in a very prospective region''.
''This project has the potential to be an economic engine for
El Salvador, much like how our recently commissioned
world-class Didipio mine has been for northern Luzon in the
Phillipines'', Oceana chief executive Mick Wilkes said.
The purchase aligned with Oceana's strategy to create value
from investment in high-quality, low-cost assets, he said.
Further submissions and testimonies are due for arbitration
by mid-2014, with a decision to follow. Oceana said yesterday
it ''will also continue to seek a negotiated resolution to
the El Dorado permitting impasse''.
In September, Pacific Rim released its latest quarterly
results, posting a net loss of $C700,000, for the three
months ended July, up $C100,000 million on the previous
quarter's loss of $C600,000.
Pacific Rim noted ''key issues'' included its ability to
secure adequate future financing for general working capital
That included ongoing arbitration-related costs and
exploration project-related expenses including maintenance of
the El Salvador properties.
Oceana's announcement yesterday included it would advance a
year-long loan to Pacific Rim of up to $C1 million, for
working capital, charging 10% interest, with a first priority
pledge over a Pacific Rim 100%-owned subsidiary. Pacific Rim
is liable to a $C500,000 fee if the purchase agreement is