Ominous signs for Oceana staff

Oceana Gold's main open pit and portal to its underground Frasers mine at Macraes, in East Otago....
Oceana Gold's main open pit and portal to its underground Frasers mine at Macraes, in East Otago. Photo by Stephen Jaquiery.
Speculation is mounting on the outcome of a business-wide review of all operations by Oceana Gold, one of Otago's largest employers.

While the majority of 600-700 staff are today starting their third week of contract negotiations with Oceana, and saying little during bargaining, contractors fear they could be at the sharp end of any initial staff reductions.

Otago has been plagued by shock job losses in recent months, from Summit woolspinners in Oamaru, Delta, the closure of Hillside workshops, Wickliffe printers, NZ Post, and Hoyts last Friday.

Oceana announced the operational review three weeks ago when it said it was putting its open-pit Reefton mine on the West Coast into ''care and maintenance'', mothballing it by mid-2015, leaving 260 jobs in limbo, in another blow for the region.

More than half the 500 jobs lost from coal producer Solid Energy operations were West Coast-based.

The situation facing major gold producers replicates the predicament of debt-laden Solid Energy, with both the global demand for gold and coal resulting in their respective prices plunging towards uneconomic levels.

Spot gold prices have clawed back from near $US1200 ($NZ1517) an ounce towards $US1300 ($NZ1643), but specialist hard-coking coal is languishing around $US130 to $US140 - 60% down on two years ago.

Oceana Gold head of business development Darren Klinck reiterated Oceana Gold's was undertaking a company-wide review of the business in response to ''the economic realities of the significant decline in the gold price''.

''We're reviewing our cost structures, capital expenditures and labour efficiencies at our operations, and this of course includes Macraes,'' he said.

While gold had at one point spiralled to $US1900, Oceana's costs to produce each ounce were at that time reported to have risen 200% over four years.

While Macraes has been a solid gold producer for almost 23 years, its costs to produce gold are almost triple that of Oceana's expanding northern Philippines operations, where copper sales offset the cost of gold production.

Mr Klinck said aside from adjustments to mine schedules, such as Reefton, and renegotiation of some ''consumable contracts'', Oceana had also reduced its capital expenditure plans.

''Management has been engaging with our workforce to discuss these initiatives,'' Mr Klinck said.

When asked about contractors' work Mr Klinck said: ''As a part of this review, the use of contractors in some areas is also under consideration and any decisions around how this can be optimised will also fit in to this overall plan''.

No dates had been established or decisions made regarding the review that Oceana could comment to the media about, Mr Klinck said, and communications with the workforce and broader stakeholders to date were consistent with what the media had been told.

''The company, just as every other gold mining company in the world, is currently faced with new economic realities.

''That requires a proactive approach to ensure a healthy and sustainable business plan for each of our operations,'' he said.

-simon.hartley@odt.co.nz

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