Triple-listed in Toronto, Australia and New Zealand, Oceana has seen its share value plunge drastically during the past three months, losing more than 65% on the Australian exchange, raising the question that the demise of its market capitalisation from more than $A500 million to $A140 million makes it a prime takeover target.
Oceana's development of the Didipio prospect in Luzon in the northern Philippines, which has long concerned analysts as to whether costs can be kept under control, had a blowout in mid-May when Oceana announced its capital costs had more than doubled from $US155 million to $US320 million - a figure chief executive Steve Orr said this week was "conservative".
He said because of the "partial suspension" of work in the Philippines, there might be a delay to the project's commissioning date.
"We need about $US185 million in additional cash and are considering a number of options to secure this funding," Mr Orr said in a market update.
Oceana had $US95 million in cash and remained bullish about the potential for a 22% rate of return on the Didipio investment.
Mr Orr said funding options included conventional and hybrid debt facilities, a share placement to present shareholders and joint venture or merger opportunities.
There had been "significant interest" from financial institutions and other gold companies.
Oceana muscled itself into the lower mid-tier of Australian gold mining companies in its cashless merger with Sydney-based Climax in 2006.
But to fully cement itself in that tier, it has to get the Philippines project from development into production.
"This is a long life and world class deposit with robust cash flows," Mr Orr said of Didipio, noting it would be the "first of a number of deposits" Oceana would mine in the area.
However, Oceana shares slipped a further 7.5% in Australian trading yesterday, down to A87c, almost 67% off the April-high of $A2.54.
ABN Amro Craigs broker Peter McIntyre said the development in the Philippines was "becoming problematic" for Oceana with cost increases in almost every sector, ranging from capital costs and labour to inflation.
"A lot of investors have shied clear [of the Oceana stock] because of the geopolitical issues that go with investment in the Philippines," he said when contacted yesterday.
While the company's New Zealand operations were performing well and underpinning the Didipio development, "massive cost blowouts" in the Philippines were working against Oceana, New Zealand's largest gold producer, with output up to 300,000 ounces this year.
While there was less cash about in the mining sector, some of the larger companies could be considering a takeover of Oceana, if its share price continued to lose value, Mr McIntyre said.
Mr Orr said during the period of reduced activity at Didipio Oceana was evaluating the project development efficiency and consolidating activities using fewer contractors.
Mr McIntyre's financial dis-closure document is available on request.
