Having earlier this year scaled back its forecast for 2011 in New Zealand to produce 255,000-270,000 ounces of gold, Oceana recently said its
In a market update this week, chief executive Mick Wilkes said the potential at Didipio for mining high-grade copper, at shallow depths and prices around $US3 a pound, meant average gold cash costs of production would become a negative cost at Didipio.
"The gold operating cash costs for the first six years are particularly attractive, being negative after the copper by-product credits," Mr Wilkes said.
Producing an average 18,000 tonnes during each of the first six years, gold cash costs would be negative $US79 per ounce with copper at a "conservative" $US3 per pound.
"That [negative $US79] also coincides with a tax holiday, making the project extremely attractive in the early years," Mr Wilkes said.
"It means the operating cash flow at spot [gold] prices in the early years averages $US150 million per annum after royalties," he said.
Craigs Investment Partners broker Peter McIntyre said the "jigsaw puzzle" of Didipio's development, which had been mothballed for lack of funds for three years, was "at last being put together".
He cited three successful capital-raisings since mid-2009, raising $320 million, construction resuming at Didipio, tendering for the future sale of concentrates and having tax credits in hand.
Oceana Gold was setting itself lofty targets (at negative $US79 per ounce), had good exploration under way at Reefton and had extended the Macraes mine life recently, he said.
Keeping the cash cost under control was positive, Mr McIntyre said. He forecast that if the global price remained above more than $US1200 per ounce, the production scenario for Oceana would be "positive".
Gold is well down from its record high of $US1921 in early September, trading about $1674 yesterday.
Oceana shares gained 4.8% yesterday to trade about $3.25.
The importance of keeping cash costs under control was highlighted in late July, when then record gold prices offset spiralling production costs at Oceana.
Cash costs were up more than $US200 an ounce from earlier estimates, or about 30% for the year, because of foreign exchange costs, higher working costs and slightly lower production.
Of more immediate concern to analysts was the quarterly cost of production rising 50%, from $US37.5 million last year to $US56.5 million.
