The granting of resource consents for Oceana Gold to expand its Coronation North pit may become crucial to the East Otago mine’s future. Senior business reporter Simon Hartley looks at the numbers behind the 21 consents issued.
For 26 years, Oceana Gold's mainstay revenue has been its flagship Macraes mine in east Otago, but its other mines are now competing for quarterly gold output.
More crucially, the cost to produce gold at Macraes is the highest in Oceana's stable of mines, which now include Waihi in the central North Island, Didipio in the northern Philippines and its development Haile mine in South Carolina.
All three began life as open pit mines, but have subsequently gone underground chasing veins of higher grade gold ore to offset poorer pit grades.
However, with different jurisdictions and costs at each respective mine, Oceana has said repeatedly each mine must stand on its own financially.
For this reason it mothballed its Reefton plant in February, after 10 years and $1billion in export receipts, in the face of declining grades.
This month, Oceana announced the formal closure and restoration of Reefton.
Senior Oceana staff have conceded in the past that if Macraes were a just-discovered mine, it could be ''arguable'' whether it would be commercially viable.
Aiming to become the lowest-cost gold producer in the world, Oceana's stats are streets ahead of the majority of competitors and if Haile becomes the bonanza predicted, even more scrutiny will come to bear on Macraes.
For its most recent quarterly results, Macraes all-in sustaining costs of producing an ounce of gold came in at $US1138 ($NZ1649) with 1.05g of gold being extracted from every tonne of ore, Waihi costs were $US726 and 7.13g per tonne and Didipio at just $US273.
Didipio's last quarterly grades were well down, at 0.64g per tonne, as predicted while it works through poorer ore, but its all-in cost is maintained by the sale of by-product copper.
Oceana is not at the point of cutting loose its seemingly poorer cousin at Macraes.
It had committed about $US3 million this year to exploration at Macraes, including 22,000m of drilling up to August, identified potential high grade gold veins and spent much of this year working on its application to have Coronation North extended.
Coronation could add up to an additional three years to Macraes' mine life, beyond 2020.
While Macraes' immediate future looks secure, the performance of Haile once it starts full production next year could yet put the blowtorch on costs at Macraes.
Oceana has predicted it will produce a record 550,000 to 610,000oz in 2017.
The 2016 costs of $US700-$US750 per ounce are expected to be pushed down further next year to $US600-$US650.
With analysts picking a relatively flat gold price in 2017, Oceana will be looking to capitalise on the positive drilling results from Coronation North, so Macraes is seen to play its part in getting costs down to the $US600-$US650 forecast.
