Speculation Oceana Gold could be a takeover target has been rejected by broker Craigs Investment Partners, given the overall volatility in the mining sector.
Separately, Oceana was this week lauded following the annual Denver Gold Forum in the US, being in a select group of small gold producers which have declining costs and and healthy cash flows, in the face of the weakening global spot gold price.
Oceana delivered an upbeat report last week on expansion of its almost 18-month-old Didipio gold and copper mine in Luzon, in the northern Philippines, announcing it was redesigning and bringing forward its underground mine development.
While production costs and languishing gold price have put its New Zealand operations under a cloud of commercial viability, in the Philippines the sale of copper byproduct from its open pit mine is offsetting the cost of gold production, creating a huge profit margin matched by few others.
Craigs broker Peter McIntyre, who now rates Didipio as Oceana's key asset, said international finance wire reports Oceana could be a takeover target was ''in the very unlikely camp''.
''There's not a lot of [global] exploration happening. The major [mining] companies are consolidating their own operations and are more concentrated on their own tenements and production,'' he said.
Oceana shares were trading around $3.04, giving it a market capitalisation of $916 million.
Craigs' research staff attended this week's annual Denver Gold Forum, which Mr McIntyre said was focused on all gold producers doing everything possible to maintain their cash profit margins.
He highlighted that the ''all in sustaining costs'' to produce an ounce of gold for the major producers had been whittled down by $US100-$US200 per ounce during the past year to around $US1000 ($NZ1225).
''Costs have clearly been the big focus during the last 12 months ,'' Mr McIntyre said.
A key theme at last year's Denver conference was gold producers re-estimating their reserves and redesigning mine plans, on the assumption of a sustained lower gold price.
''With this now done [in house] costs were the remaining lever for companies to pull in order to maintain a profit margin as the gold price fell,'' Mr McIntyre said.
In New Zealand, Oceana had during the past year redesigned all its open pits, on the West Coast and East Otago, as well as laid off staff, while clearly signalling the possibility all operations in New Zealand could be mothballed or closed by the end of 2017.
On the industry in general, Mr McIntyre said ''Operations are being sweated to deliver productivity improvements, workforces have been `right-sized', all contracts have been renegotiated and employee performance is now being measured and scrutinised.''
He believed that while the ''easy wins'' in cost savings had been achieved, there was another 10%-15% of savings to be made, over the longer term.
''Several smaller producers continue to report much lower `all in sustaining costs' and still generate cash, such as Independence Group, Alacer Gold and Oceana Gold.
''That's the beauty for Oceana, of having the copper offset in place,'' he said.
Mr McIntyre cautioned that most larger gold companies continued to carry ''significant debt loads'', and while having successfully extended their debt maturity terms, few had shown a free cash flow profile which could cover debt obligations at the present gold price, or even lower level.
''Debt maturity profiles start in 2016-17, leaving two to three years for companies to accumulate cash, or wait for a price recovery,'' he said.
Mr McIntyre said that at Denver there was very little talk about merger and acquisition opportunities.
The takeover scenario about Oceana stemmed from a report this week having noted there were no ''political roadblocks'' in the Philippines and the Government was pro-mining, while Oceana was now projecting higher annual cashflows, lower costs and longer mine life at Didipio.
However, Mr McIntyre said there was several risks to be considered, including expectations of a strengthening US dollar, which would further dilute the global spot gold price and pressure on increasing production costs.
Since striking a record high of $US1900 an ounce in September 2011, then $US1800 the following September, gold drifted down to below $US1200 in December and was trading around $US1233 yesterday.
Mr McIntyre said if gold resumed trading for some time at the $US1200 level, or below, profit margins would be ''pared to the bone'', or unsustainable for some producers.
