Oceana Gold June quarter profit nose-dives

Oceana Gold has posted a more than 80% slump in after-tax profit for the quarter to June, declining from $US4.14 million ($NZ5.16 million) a year ago to $US735,000 ($NZ917,000), as softening global spot gold prices offset gains elsewhere.

A loss for the six months to June of $US3.12 million was booked, compared with an after-tax profit of $US18.9 million the year before.

While ore grades of 1.29oz of gold per tonne were repeated, Oceana mined an increase of 12% of ore, from 1.40 million tonnes to 1.57 million tonnes.

An increase in gold production and favourable exchange rates helped East Otago-based Oceana Gold to trim its crucial cash cost of producing gold by almost 9%.

While production was up 10% to 55,709oz and cash costs fell 8.6% from $US1126 in the first quarter to $US1029, a softening in global spot gold prices undermined the average price received by Oceana, which declined almost $US100 per oz to $US1613.

Oceana's margin per oz, after production costs, rose only slightly from $US582 to $US584.

By comparison, mining giant Newcrest Mining produced an ounce of gold for $US579, leaving a profit margin of $US931, with average grades at 1.59g per tonne, from its total 10 mines in Australia amd Papua New Guinea.

In its second-quarter report to June, Oceana chief executive Mick Wilkes said the South Island operations, at Macraes north of Dunedin and Reefton on the West Coast, had achieved good production improvements and the company was "on track" to deliver earlier full-year guidance of between 230,000oz and 250,000oz.

Following release of the quarterly report, Oceana shares were up 4% at $NZ2.55The 10% production increase was driven by improved mill throughput, from both Macraes and Reefton open-pit ore, but that was partially offset by a lower recovery rate, declining from 81.4% to 79% for the quarter.

Oceana spent $US52.5 million during the quarter on construction of its gold and copper Didipio mine in the northern Philippines, to date having expended $US161 million.

The project, flagged last year as almost 20% more than expected at $US220 million to finish, is more than 70% complete and on track to be commissioned by the end of the year.

Oceana, which has a cash balance of $US73 million, also gained credit approvals recently from several banks for $US220 million, mainly for repayments of two bond tranches, but about $US50 million is for working capital.

- simon.hartley@odt.co.nz


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