Oceana shares down 33% from high

The gloss has dulled on Oceana Gold shares which have shed 33% in value following a stellar run to their high of $5.41 last September.

The shares of New Zealand's triple-listed and largest gold producer have steadily declined from $5.41 to $3.62 yesterday due to several reasons, Craigs Investment Partners broker Peter McIntyre said.

"As the global recovery starts to get some traction, investors are beginning to move away from more defensive assets [which include gold] and are at looking assets which are riskier and offer greater growth attributes," Mr McIntyre said.

Oceana was first propelled into the billion dollar-plus market capitalisation range last October but, at $3.60 yesterday, its market cap value had diminished to $943 million.

Almost three and half years ago, Oceana had a market capitalisation of just $55 million.

During the 18-weeks since the September high, global spot gold prices rose from $US1286 ($NZ2292) to an all-time high of $US1427 in December, but have since eased to $US1335 yesterday.

Mr McIntyre said a combination of profit-taking by investors, concerns over rising cash costs to produce gold which would impact profit margins, and a global investor move to silver had likely contributed to the 33% downturn in value.

Oceana had recently raised $C193.5 million ($NZ260.9 million) through two separate raisings on the Toronto stock exchange which is its principal listing, but this meant a dilution of about a fifth of its shares on issue.

Alongside the successful capital raising, New Zealand resource estimates and mine life had been extended and the resumption of construction in the mothballed Philippines operation was " a well overdue positive" for Oceana, Mr Mcintyre said.

However, he said the share prices could also be affected by other negative news.

Oceana was last week prompted to reject claims it had violated property rights of indigenous people living near the Didipio mine in Luzon in the northern Philippines, following reports in the local media.

Oceana announced yesterday it was taking over full control of its open-pit operation at Reefton on the West Coast from Stracon Mining, which had been operating and maintaining its equipment fleet since 2006.

The change follows a similar move in July last year when Oceana took over the Frasers underground mining contract of Australian-based Byrnecut Mining, which had been in place since 2006 and had been costing about $25 million per year.


Oceana Gold
Positives:
+ Successful recent $NZ260.9m capital raising.
+ Restart of Philippines gold/copper development.
+ 100% unhedged and selling into buoyant global market.
Negatives:
- Share dilution by about a fifth.
- Forecast cash costs up 57%-67%.
- Investors looking for growth assets.
- Capital expenditure in the Philippines. 

 

 

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