Oceana Gold's earnings strong; eyes on Didipio project

Oceana Gold, the operator of the Macraes gold operation in East Otago, has reported another strong earnings result in the year ended December 31.

The Melbourne-based company reported operating earnings of $US163.9 million ($NZ195.73) for the period, a 17% improvement on the previous year.

The company reported record full-year revenue of $US395.6 million from an average gold price received of $US1587 an ounce, a 29% increase on the full-year 2010 revenue of $US305.6 million.

Revenue for the fourth quarter of $US106 million exceeded the same quarter in 2010 by 14%.

Gold sales for the year were nearly 250,000 ounces at an average cost $US875 an ounce.

The company's cash operating margin for the year expanded by 25% to $US712 per ounce compared with $US570 an ounce in 2010.

Craigs Investment Partners broker Peter McIntyre said the cash costs for the company had increased significantly and the company did not quite meet some of its targets.

However, it had significant cash reserves of close to $US170 million and the company was confident it had the reserves to meet all its commitments in the coming financial year.

The reported profit of $US44.2 million was only slightly down on 2010.

The Didipio project, in the Philippines, was keeping analysts and investors intrigued, he said.

Once the project started, the copper production should easily offset production costs for the new gold project and provide a large free cash flow back to shareholders.

Oceana Gold chief executive Mick Wilkes said the Didipio project continued to make strong progress throughout the year.

The company met key construction milestones, including starting the concrete pour, nearly completing the construction accommodation camp, mobilisation by the mining contractor to the site and the arrival of the first shipment of structural steel.

All major construction contracts for the project had been awarded or were in the process of being tendered.

"Our New Zealand operations posted relatively stable earnings in 2011 and continue to generate positive free cash flows. With the construction of the Didipio project progressing according to plan, and scheduled to commission in fourth quarter 2012, combined with exploration opportunities in New Zealand and the Philippines, the company is on the right track to achieve its strategic targets."

Exploration expenditure for the year was $US10.7 million with a focus on New Zealand, he said. The company earlier announced an expanded resource and likely mine life extension to at least 2017 at Frasers underground in the fourth quarter.

Mr McIntyre said Oceana Gold contributed greatly to the Otago and Dunedin economies and it was pleasing to see the company continue to report strong operating profits and cash flows.

- dene.mackenzie@odt.co.nz

 

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