Oceana spending $8m on Macraes search

Oceana Gold has indicated exploration is continuing at its mainstay Macraes site in East Otago, and spending has been boosted to $8 million during the next two years.

While the future of operations remains under a cloud, and all South Island operations could be mothballed by the end of 2017, positive exploration could yet see some mine life extension in the future.

Reefton, on the West Coast, could be mothballed by the end of this year and Frasers underground, at Macraes, by the end of 2016. The open pit at Macraes has a mine life to the end of 2017.

In a market report yesterday, ''analyst site visit presentation'', the company outlined its above-ground and underground operations at Macraes, including exploration updates in several areas.

Oceana is now in its 25th year of operation and in March last year poured its 4 millionth ounce of gold. It is targeting calendar 2015 production of 295,000oz to 335,000oz, from all operations.

Craigs Investment Partners broker Peter McIntyre said while $8 million was relatively ''small beer'' for Oceana, the company was in a good position to use positive cashflows from its gold-copper mine Didipio in the Philippines, and use Macraes infrastructure and staff while it was still there.

''There's always the possibility of opening new areas and [extending] mine life. They've been very successful at doing that over the years,'' he said.

Oceana has about 500 permanent employees at Macraes, including 73 site-based contractors, with 138 working in the open pit, 181 in Frasers underground and about 80 working in the mill, processing ore. The open pit and underground are both round-the-clock operations.

The report reiterates that the Macraes pit has an estimated mine life to around 2017 and the seven-year-old Frasers underground is estimated to be until 2016 ''or later at similar [gold grade] rates''.

Mining had started last September at the new Coronation pit, in the northwest of the Macraes tenement, but Coronation will not extend overall mine life. No production details were included in the report.

However, in ''looking forward'', Oceana said it was ''stepping up'' its exploration effort and $8 million would be spent during the next two years at Macraes. While the Fraser's underground was ''expected to continue to the end of 2016'', Oceana was continuing to explore deeper than the existing tunnels, and a study was under way at Round Hill.

The company said ''potential exists for a mine extension'', at the Round Hill and Frasers Tungsten project, from open pit extensions. Options include new plants, one of which could handle three million tonnes of ore per year, and another six million tonnes.

Separately outlined was a proposed, $2.5 million, two-phase drilling plan for Frasers underground, to the east of the tunnels.

The first exploration phase would be 10 drill holes, totalling 2285m of drilling, but any drilling for phase 2 was dependent on positive results from the first 10 holes.

Evaluation was under way elsewhere around the tenement. Macraes South had some potential exploration targets around Home Reef, Shaws, Taylors and Wilsons.

There were also possible targets at Macraes North, at Mt Highlay-Bruhns and Mareburn. Drilling had been completed at Nunns-NZGT and the gold resource was still being estimated.

simon.hartley@odt.co.nz

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