Oceana has become one of the most cost effective gold producers in the world, with the copper by product from its Didipio mine in the northern island of Luzon creating strong cash flows. Its debt is spiralling down and cash in hand has almost doubled to more than $US50 million ($NZ66.4 million).
In a sharemarket update released yesterday by the company, in a Q&A format, the respective costs at its New Zealand and Philippines operations were scrutinised.
Last week, Oceana said it was extending the mine life of its Frasers underground mine, at Macraes in East Otago, by a year to the end of 2016, but yesterday chief executive Mick Wilkes pushed that expectation out further.
''At Macraes we'll be mining for three to five years at 150,000 ounces per year from the open pit and [Frasers] underground, which is a similar production level to today,'' he said in the update.
Its Reefton open pit operation is still scheduled for mothballing at the end of this year.
''The New Zealand operations are looking a lot more healthy with the lower exchange rate and [lower] oil price,'' Mr Wilkes said.
Last year, the copper price was $US2.60 per pound, which Mr Wilkes believed was not logical, given supply and demand fundamentals.
''However, in the past few weeks the copper price has been trending back up again and I expect it won't be long before it's again over $US3 per pound and then moves considerably higher with the expected supply shortfall in 2016,'' Mr Wilkes said.
He said Didipio continued to produce high grade ore, in a large ore body of 150m by 100m, which had low operating costs because of the low strip ratio, and also the ''significant'' copper by product sales.
''So it has been a strong performer in these times of low gold prices,'' Mr Wilkes said.
He described exploration at Didipio, and elsewhere in the Philippines, as having ''only scratched the surface'', and expected ''positive results'' from exploration programmes later in the year.
Also, Mr Wilkes said the company expected ''some positive news from New Zealand at Macraes, from exploration and project development at Round Hill [at Macraes] and Blackwater [near Reefton]''.
Another consideration at Macraes was a development for extracting tungsten as a by product of gold, which could also extend the mine's life.
Crucial costs for Oceana Gold
• Debt of $150 million repaid.
• Cash in hand up from $US26.4m to $US51.2m.
• After growth capital costs, Oceana generated $US106m in free cash flow last year.
• A US10c change in the copper price per pound changes all in sustaining costs of gold production by $US40 per ounce at Didipio.
• Didipio moves from generator to main electricity grid supply this year; savings of $US8m $US10m.
• Reduction of proposed Didipio open pit size saves $US215m in mining costs.
• Fast tracking of Didipio underground to cost $US116m.
• A 10c fall in New Zealand fuel costs equates to a $US10 per ounce decline in all in sustaining costs of production.
• A 1c decline in the New Zealand dollar rate, against the US greenback, equated to a $US15 per ounce fall in production costs.
• At US75c exchange rate, operating costs fall in New Zealand by $120 per ounce to produce, compared with US83c a year earlier.
• The global decline in oil prices is expected to save Oceana $US15m, across Didipio and New Zealand operations.
Source: Oceana Gold
