Oceana intent on spot-market sales

Triple-listed East Otago miner Oceana Gold has announced a capital-raising programme - seeking a total $US75 million ($NZ106 million) - to buy out its forward hedging contracts so it can sell its gold on the global spot market.

Oceana is betting it will be a more attractive company to major equity investors and get better prices on the spot market, which hit a record high of $US1226 per ounce in early December, and traded gently down to $US1101 yesterday.

Oceana shares spiked to $3 last week for the first time in almost two years and were trading steady around $3.09 after yesterday's announcement.

In separate Oceana results released yesterday, it sold gold in the third quarter of 2009 at an average price of $US838 per ounce and in the following quarter to year-end at $US927 - the year-average being $US790.

Oceana has filed a short-form prospectus with the mining-friendly Toronto Stock Exchange, its principal listing, offering ordinary shares, plus it is also conducting a placement of ASX-listed chess depository interests; the latter subject to shareholder approval at a special meeting on March 25.

Craigs Investment Partners broker Peter McIntyre said Oceana appeared comfortable in buying back the forward contracts, for which it will have to pay a premium.

Many major listed gold companies did that in Australia last year.

With record gold prices, investors have been frustrated at companies not utilising spot-market exposure to lift profits.

"It appears Oceana will be relinquishing about $NZ90 million in hedging contracts.

"It's a bullish signal from Oceana on where they believe spot gold prices are headed," Mr McIntyre said yesterday.

He said of the $US75 million sought to be raised, Oceana was likely to spend most of it on the hedging buy-back, although Oceana yesterday said remaining funds, if any, would be used for other capital working requirements.

This is the second time in seven months Oceana has offered chess depository interests.

Trading as ordinary shares, they are held for investors in a nominee company.

Last July it raised $A24.2 million ($NZ30 million) in a funding boost designed to expand its exploration programme, which could ultimately add three years to the mine life of its Macraes and Reefton operations.

The latest $US75 million offering is being conducted by a syndicate of underwriters, led by Macquarie Capital Markets Canada Ltd.

In the other announcement yesterday, prior to Oceana delivering its full-year report at the end of the month, it outlined how the crucial cash costs for production of each ounce of gold was well below guidance given earlier in the year.

Cash costs were $US411 per ounce, 28% down on 2008, and compared well to predictions a year ago that cash costs would be in a range of $US455 to $US495 per ounce.

The 20-year-old Oceana has already announced record gold sales of 300,044 ounces for its calendar year, up 14% on the previous year, and twice upgraded its estimated mineral reserves since December.