Cash costs have gone up more than $US200 ($NZ230) an ounce from earlier estimates, or about 30% for the year, because of foreign exchange costs, higher working costs and slightly lower production.
However, of more immediate concern to brokers at Craigs Investment Partners was the quarterly cost of production rising 50%, from $US37.5 million last year to $US56.5 million.
Oceana said in its second-quarter report to June, released yesterday: "Costs are expected to remain under pressure if the New Zealand dollar remains strong."
Foreign exchange costs accounted for about an extra $US120 in the production cost for each ounce. The kiwi has hit 30-year highs against the greenback this week, trading above US87c for several days.
Shares in Oceana fell 13% yesterday on the news, trading at $3 a share.
Craigs Investment Partners broker Peter McIntyre said Oceana was a good example of companies that exported and had to deal in US dollars and were being hard hit by the strength of the kiwi.
"With cash costs in US dollars, this strength in the kiwi is really beginning to affect profitability," Mr McIntyre said.
He said Oceana's operating profit had fallen from $US20.9 million a year ago to $US13.9 million, it was facing higher interest costs, and foreign exchange losses totalling $US1.9 million were booked.
The quarterly increase in production costs "was of real concern" and Oceana would have to work hard to rein in the escalation, he said.
While the latest record spot gold price is outside Oceana's reporting period, global prices climbed steadily during the reporting quarter to reach a record $US1628 earlier this week, trading around $US1612 yesterday. Oceana has no hedge contracts in place and sells directly into the daily global spot gold market.
Oceana's earlier full-year production forecast was 260,000280,000 ounces, but that was revised down to 255,000-270,000 ounces yesterday.
The downgrade was because production during the first half of the year was "slightly below expectations" due to mining rates at Frasers underground at Macraes and open pit mining at Reefton on the West Coast coming in below estimates.
"This was largely driven by labour shortages in some of the positions. There was less higher-grade ore making its way to processing, and there was more lower-grade stockpiles being processed in its place," Oceana's head of business development, Darren Klinck, said when contacted yesterday.
For the year to date, gold sales were down from 132,388 ounces a year ago to 126,100, but revenue was up 44% at $185.6 million, because of the rising gold price.
Second-quarter gold sales were down 5.3% from the first quarter, at 61,335 ounces.
Oceana said its cash costs were up from an estimated $US645-$US685 an ounce during the full year to $US850-$US890.
Cash costs were $687 an ounce in the previous quarter but leapt 34% to $921, because of the kiwi and higher production costs.
However, a higher grade of ore is expected to be processed in the second half of the year, returning better results.
