Oceana Gold's escalating production costs - crucial for its cashflow position - have seen it book a $US10.6 million ($NZ14.6 million) loss for the quarter to June.
The loss could not have come at a worse time for Oceana, seeking to raise $US185 million for its gold-copper Didipio development mine in the northern Philippines against a backdrop of risk-averse global investors and the worldwide credit crunch.
Work on the Didipio project was suspended in late June, following a cost blowout from $US155 million to $US320 million, but Oceana has since said it is in negotiations with unnamed parties which could lead to a joint venture or merger arrangement.
Oceana's share price slumped further yesterday, falling 10% to a historic low of A72c, having been as high as $A4.15 during the past year.
ABN Amro Craigs broker Peter McIntyre said with New Zealand operations acting as Oceana's "cash cow" the expense of developing Didipio was beginning to "hinder performance".
"All of these costs are beginning to add up and there are further delays ahead," he said.
Oceana has been saying for more than a year until May, production from New Zealand was expected to come in between 280,000oz and 300,000oz.
Oceana chief executive Steve Orr said in a statement yesterday it "remained on track" to meet the production guidance of 265,000oz-275,000oz, which was revised downward 5% to 8.3%, because of a slower start to production from the Frasers underground mine at Macraes.
Cash flow was up from production of 58,831oz of gold from three mines East Otago and the West Coast, compared with 38,085oz at the same time last year, from one mine.
The average price of gold rose almost 30% from $US698 to $US902, with Oceana selling directly on to the spot market.
For the quarter to June 2007, Oceana booked net earnings of $US16.5 million and a $40 million profit when combined with hedging and currency transaction.
For the quarter to June 2008 its net earnings were at a $US19.24 million and after hedge and currency transactions it booked an overall loss of $US10.63 million - largely from increased production costs.
Overall revenue was $US53 million from gold sales for the quarter, but production costs came in at $US42.9 million.
Chief executive Steve Orr said in a statement cash operating costs per ounce increased because of rising electricity and diesel prices, the timing and $US76 per ounce cost of waste stripping and continued strength of the New Zealand dollar.
Diesel costs added $US45 to each ounce of gold produced, while electricity added $US74.
Electricity prices had reduced significantly, Mr Orr said, but diesel was forecast to stay high for the reminder of the year.
He said earnings before interest tax depreciation and amortisation decreased because of an unrealised foreign exchange loss of $US4.3 million Mr Orr did not expand on earlier statements about being in negotiation with other parties to develop Didipio, other than to say Oceana was "evaluating a number of alternatives to secure supplemental funding" for the project.
