Another 10 years for Macraes

The Macraes mine. Photo ODT
The Macraes mine. Photo ODT
Oceana Gold has signalled a potential 10-year increase in the mine life of its mainstay operation at its Macraes mine in East Otago.

Company chief executive Mick Wilkes released a market update yesterday on exploration in New Zealand, South Carolina (US) and the Philippines, highlighting potential growth opportunities across all three countries following a raft of positive exploration results.

Oceana had earmarked $US30million-$41million ($NZ41.2million-$56.3million) for exploration this calendar year, including up to $US8million at Macraes and up to $15million at Waihi, in the North Island.

''In New Zealand, our objective is to demonstrate 10-plus-year mine life extensions for both Waihi and Macraes, and continuing positive exploration results, such as what we continue to see, gives us confidence in achieving this objective,'' Mr Wilkes said.

Last December, Oceana received council consents to mine the Coronation North open pit at Macraes, which then was estimated to add a further three years to the overall mine life; beyond 2020.

More than 600 are employed at the Macraes site, which last calendar year produced 153,563oz of gold, or almost 37% of the total 416,741oz across the company; the largest contribution.

Oceana's shares declined 3.3% to $A4.03 after the announcement.

Craigs Investment Partners broker Peter McIntyre said the market did not respond well to the news, but given the 10-year timeframe for the mine lives, it was positive for the company and would ultimately be so for shareholders.

''Oceana has an uncanny ability to continually expand mine life. If it can maintain low cost [of] extraction, that will be good for Oceana and its staff.''

Mr Wilkes said drilling at Macraes was focused on the prospects Golden Point, Coronation North, Trimbells and Frasers West targets. Drilling at Frasers West had highlighted the potential of a ''modest bulk, low-grade [gold] resource'' with a low ore to waste ratio, close to existing haul roads and the processing plant.

At Waihi, three underground and up to five surface drills found good grades of gold across multiple targets, and 12,000m of of new drilling was scheduled to start in the third quarter of the year.

The results at Haile in South Carolina from the Palomino and Snake prospects presented a ''significant opportunity at depth'' for further incremental resource growth, which was not included in the upgraded gold resources recently announced after a study at Haile, Mr Wilkes said.

While the Macraes open pits and underground Frasers mine have consistently been the top-performing mines in its portfolio for the past 27 years, the Didipio gold and copper mine in the Philippines has produced more gold than Macraes during two recent quarters.

Crucially, Didipio's cost of production is only a small percentage of the input required at Macraes, largely because of the sale of by-product copper in the Philippines.

Oceana's new Haile mine in South Carolina is also expected to challenge Macraes for output once it is fully ramped up.

Mr Wilkes said mine life estimates for Haile had been pushed out to 16 years for the open pit mining and six years for the underground Horseshoe prospect.

''Proven and probable'' estimates of Haile's gold reserves had increased by 70%, from 2.02million ounces to 3.46millionoz.

''We expect significant cash flow generation from Haile, where the [earlier] study has determined $US1.4billion in undiscounted pre-tax cash flows on current reserves only, and $US1.8billion including total current mining inventory,'' Mr Wilkes said.

Oceana would shortly start the permitting process, working closely with the regulator and all stakeholders to advance the Haile expansion project.

''In the meantime, we continue to ramp up operations and drill targets at depth and along strike to further add to the already significant resource base,'' Mr Wilkes said.


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