Oceana's gold production down but within guidance

East-Otago based Oceana Gold's production for calendar year 2011 was down almost 6%, but was in line with guidance and also the crucial cash cost of production per ounce.

In a report yesterday outlining its fourth-quarter result, Oceana included some unaudited figures for the full year 2011, which will be released in full detail in mid-February.

Fourth-quarter gold production from its Macraes site in east Otago was 44,451 ounces and from Reefton, on the West Coast, 21,299 ounces, in total up 11% at 65,750 ounces for the quarter, compared to the third quarter.

During 2010, Oceana produced 268,602 ounces at a cash cost of $US570 per ounce, while unaudited figures for 2011 were 252,499 ounces, at a cost of $US875 an ounce, which was within the guidance range of $US850-$US890 per ounce.

"This [gold production] was slightly below expectations for the quarter and subsequently the year," Oceana said yesterday. It had signalled last year that some lower ore grades had to be worked through.

Craigs Investment Partners broker, Peter McIntyre, said lower grade ores and less tonnage from both mine sites had contributed to the rise in cash costs, but in the year ahead, higher grades of ore were expected from both Macraes and Reefton.

With Oceana expecting production to begin at end of this year from its gold and copper mine in the northern Philippines, "preliminary" guidance for 2013 has been estimated at 300,000-350,000 ounces of gold at cash costs of less than $US500 per ounce, offset by copper sales.

Mr McIntyre said this guidance gave Oceana a "wide parameter", but with copper prices recently rallying, Oceana would be hoping copper prices would offset gold cash cost prices once Philippines production began.

Oceana said while Reefton's fourth-quarter production showed "significant improvements", compared to the previous quarter, with better grade and recoveries, the quarterly production did not meet expectations because of less tonnage of ore mined and processed.

Revenue for the fourth quarter was $US106.6 million. The average gold price received during the period was $US1705 per ounce on the 62,515 ounces sold.

Gold hit a record high of $US1921 in early September, and had since fallen to trade around $US1600 recently. Gold was about $US1654 yesterday.

- simon.hartley@odt.co.nz


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