Oceana Gold’s share price prompts broker’s ‘sell’

Despite a 2 million-tonne slip in Waihi’s historic Martha pit last month,  adjacent underground...
Despite a 2 million-tonne slip in Waihi’s historic Martha pit last month, adjacent underground operations continue. Photo supplied.

A strong share price running more than 100% up on a year ago has prompted a broker's downgrade on Oceana Gold, despite it booking a solid quarterly result.

Last week, New Zealand's largest gold producer booked a 24.5% increase in revenue, from $US129.3 million ($NZ183.7 million) to $US161 million.

However, its after-tax profit came in slightly below a year ago at $US23.5 million, the bottom line having been hit by a $US18.3 million loss in undesignated hedging.

Craigs Investment Partners has downgraded its stock recommendation from ‘‘hold'' to ‘‘sell'' on Oceana, but maintains an otherwise bright outlook on all other fronts.

Craigs broker Peter McIntyre said Oceana's March quarter result was ‘‘solid'' and the brokerage's view on the overall quality of the portfolio and management had not changed.

‘‘Oceana has done exceptionally well over the past 12 months,'' Mr McIntyre said.

Its $5.20 share price yesterday was 100.7% up on a year ago.

‘‘Oceana has got a little ahead of itself . . . its share price is currently ahead of where we value Oceana,'' Mr McIntyre said.

He expected investors to consider trimming their holdings or to take some profit from the higher price.

For the three months to March, Oceana's gold-copper mine Didipio in the northern Philippines had an ‘‘outstanding quarter'', while gold production at Waihi in the central North Island was up more than 9% on Craigs' predictions.

Last week, Waihi suffered its second rockfall, in the same place, into its Martha open pit which would probably delay its reopening.

However, underground operations at Martha continue, unimpeded by the slip.

Mr McIntyre expects more than 50% growth in gold production from Oceana during the next two years; up to 688,000oz in 2018, and continued reduction in costs of production towards $US400 per oz.

‘‘That would make Oceana the world's lowest cost gold producer of [that] scale,'' he said.

simon.hartley@odt.co.nz

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