Oceana reports 43% increase in Macraes resource

Oceana Gold has announced an estimated 43% increase in gold resources at its mainstay Macraes mine in East Otago and reinstated a previously mined area on to its inventory.

The 19-year-old company, which has mined more than 2.5 million ounces from Macraes since 1990, has been bullish in recent months on both its exploration programmes in existing brownfield areas with an eye to extending the overall mine life.

Gold production this calendar year is expected to surpass earlier estimates of a record 300,000 ounces to potentially 303,000 ounces.

In late-July, triple-listed Oceana raised $30 million to expand its exploration programme, hoping to ultimately extend its mine life by a further three years after 2014, and began a third drilling programme in August following "promising results" from earlier drilling.

New Zealand shares in triple-listed Oceana began yesterday at $1.62 and gained almost 5% to trade around $1.70, Craigs Investment Partners broker Peter McIntyre said.

While Oceana gave no indication of a mine-life extension, Mr McIntyre said it could potentially add a further four and a-half years of life to the mine.

"This is good news for Otago's economy in general, with the mine life possibly increased by several years," he said.

Yesterday, new chief executive Paul Bibby said the "updated resource estimate" had materially increased the gold resource base at Macraes mine and was an important step towards extending the mine-life forecast.

"The current brownfields exploration drilling programme is active on a number of fronts, particularly Round Hill, where the drilling is focused on upgrading inferred resources to the indicated category," he said in a statement to markets yesterday.

When asked to quantify the estimated 42% increase, Oceana management said all categories of "previous mineral resources" at December 2008 were 3.39 million ounces and all categories of "current mineral resources" at June this year were 4.85 million ounces - a 43% increase.

A disclaimer accompanying yesterday's announcement covering forward-looking statements notes that mineral "resources" which are not mineral "reserves", "do not have demonstrated economic viability", which includes the estimated deposits reported at Round Hill.

Mr Bibby said the former open pit mining areas at Macraes; Southern Pit, Round Hill and Golden Point had been mined to their "economic limits", then partially back-filled and removed from Oceana's inventory of estimated resources in, respectively, 2003, 1998 and 2003, he said.

A ten-hole diamond core drilling programme is nearly complete, to validate reverse circulation drill holes completed between the 1980s to mid-1990s, Mr Bibby said.

"The results of this programme will also be known by the end of the year," he said.

He said following resource estimates at Round Hill, a conceptual open pit mining of a "sizeable cut-back" could be centred on the hill.