Oceana Gold is in a small clutch of gold producers expected to deliver strong results for the final trading quarter of 2015; the key for each company being free cash-flow from operations.
With high gold production costs across the sector, keeping costs in check and making production guidance has become crucial for listed producers.
Craigs Investment Partners broker Peter McIntyre said the imminent fourth-quarter reporting season was expected to be ‘‘reasonably strong'' for gold and base metal producers.
‘‘Gold producers are the best placed, with robust gold prices coupled with fuel and currency tailwinds to drive free cash-flow, particularly for domestic producers,'' he said.
He expected the quarterly results from Evolution Mining, Oceana and Sandfire Resources to deliver ‘‘strong results'' for the period. Each was expected to deliver production beyond earlier guidance for the quarter.
Mr McIntyre expects Evolution to deliver an estimated 812,000oz of gold for the year; beyond the upper end of company guidance of 810,000oz, and to upgrade its full year 2016 production and costs guidance, given the inclusion of output from its Cowal & Mungari mine.
He said Oceana's fourth quarter was expected to boost its calendar 2015 result. Mr McIntyre estimated 421,000oz output at an all-in sustaining cost of $US674 ($NZ1040) per ounce, against Oceana's earlier guidance of 380,000-410,000oz, at $US690-$US740 per ounce.
‘‘The recent inclusion of Waihi will have helped bring down the group costs,'' Mr McIntyre said of Oceana's $132million purchase of Newmont's Waihi gold mine in the central North Island last May.
He also expected Sandfire to deliver higher quarter-on-quarter production results, as its costs would also benefit from lower fuel and power prices.
‘‘Healthy balance sheets are supporting more exploration, especially when it comes to extending mine life.
‘‘Expect exploration updates from Northern Star Resources, Sandfire Resources, Regis Resources, St Barbara and Oceana Gold,'' Mr McIntyre said.
However, several companies are being picked to disappoint, having for a variety of reasons had difficult trading conditions during the fourth quarter.
Newcrest Mining, which had a mill out of action for five weeks due to a motor issue, was expected to report a 38% decline, quarter on quarter, of gold, to deliver 98,000oz.
However, the shortfall would probably be recovered through processing of stockpiles during the second half of this calendar year, Mr McIntyre said.
Lihir expected to deliver a ‘‘flat'' quarter-on-quarter result, with group output forecast to be down 7%, and costs rising 17%.
‘‘Lihir's smaller assets are unlikely to help fill the gap in the December quarter,'' Mr McIntyre said.
Similarly, Alacer Gold and OZ Minerals are expected to report lower gold production for the quarter, with costs also rising and production lower, he said.
‘‘The [already released] December quarter results for Regis Resources, St Barbara and Northern Star Resources have been strong and should set the tone for a positive reporting season among the gold sector,'' Mr McIntyre said.
Those three companies had lower production costs and higher Australian dollar revenues, which helped drive free cashflow.
‘‘Their costs were continuing to benefit from lower fuel, power and labour-contractor prices,'' he said.
● At the time Oceana purchased Waihi, a slip in April last year closed access to the historic Martha open pit and mining has been restricted to underground operations.
This week Oceana said it was planned to build a new access ramp over the next five to six months.
Once it was in place, Oceana would see if it could fix the slip and consider how it could mine the remaining ore.
