Its shares went into a trading halt yesterday after the East Otago gold miner signalled it was offering an institutional placement of 24 million shares, equating to 15% of the present shares on issue, through ASX-listed "chess depository interests", which rank alongside ordinary shares.
The 19-year-old Macraes mine was forecast to have a seven-year life in 1990, but is now estimated to have available reserves until 2014.
The proposed six to 18 months of boosted exploration could push that mine life out a further three years.
ABN Amro Craigs broker Peter McIntyre said Oceana had "most likely exhausted all other avenues in its quest for more capital", having spent a year unsuccessfully seeking backers for its mothballed gold/copper development in the Philippines.
At $1.45 per share yesterday, 15% of Oceana would be valued at $35 million. But Mr McIntyre said the placement was likely to be offered at a "significant discount" in a range between 15%-20% on the share price.
"This issue will have a heavily dilutionary effect for existing shareholders," he said when contacted yesterday.
The Didipio development gold/copper mine was mothballed in June last year after its projected costs doubled to $US320 million, and Oceana had been unsuccessful in finding financial backing of $US185 million to reactivate the project.
Oceana said yesterday an unspecified amount of the money raised would be used for general corporate purposes, including a "revised feasibility study" at Didipio.
Oceana chief financial officer Marcus Engelbrecht said, "The opportunity to significantly extend the mine life of our New Zealand operations provides considerable upside for shareholders in the medium term given the scheduled expiry of the company's hedge book at the end of 2010."
Mr McIntyre said Oceana's hedge book commitments had been a drain on Oceana, which was committed to selling gold at predetermined contract prices well below the global spot market, but he noted completing its hedge book obligations at the end of next year was "only good news" if spot prices remained high.
Oceana's shares have had a see-saw ride during the year, moving off 28c in December to peak at $1.75 in June and to latterly trade around $1.45.
Mr McIntyre was not surprised by the announcement of the book build yesterday, saying "it could have been expected earlier", considering in 2008 Oceana booked a $US54.7 million loss, following the $US69 million loss in 2007.
Its cash reserves in March were reported to have fallen from $US108 million to $9.7 million and its liabilities exceeded assets by $US43.4 million, Mr McIntyre said.
Yesterday, Oceana released an unaudited summary of its financial position as at June 30 showing it had $US21 million in cash and a gross debt of $US174 million. Its full second-quarter result is due at the end of the month.
"Forecast cash flows will meet current debt obligations over the next 12 months," the Oceana announcement said.
While Oceana has been hit hard by the credit crunch, it has been bolstered by the recent near-record global gold prices, its quarterly production costs are down, it has reported record quarterly production from its Macraes mine and it is still forecasting delivery of a record 280,000oz-300,000oz this year.
• The ASX "chess depository interests" let investors have a "beneficial interest" in foreign financial products but not legal title, which is held by a nominee company.
