Oceana Gold appears to be on target to produce a record 550,000-600,000 ounces of gold this calendar year, albeit at the bottom end of its guidance range.
While gold production at Oceana's relatively new $US380 million Haile mine in South Carolina is ramping up and adding to production, its 27-year-old Macraes mine in East Otago is expected by analysts to have to work through low-grade ore for much of the last quarter of the year, potentially dragging down the overall ounces.
Oceana produced 408,396 ounces from its mines during the first three-quarters of 2017, meaning the fourth quarter has to produce at least 141,604oz to hit the minimum guidance of 550,000oz.
Craigs Investment Partners broker Peter McIntyre said Oceana's share performance during recent months was down 22.75%, with a high of $4.88 and a low of $3.08.
''From a shareholder's perspective over the last 12 months it's been a pretty tough ride,'' he said.
While Oceana's financial guidance in October was unchanged, Craigs' expectations were at the bottom end of production guidance, around 550,000oz, he said.
Mr McIntyre said plant commissioning issues at Haile during the second quarter impacted performance, but he was expecting a continual ramp-up in production from Haile.
At Macraes lower-grade ore had to be processed and production declined against a year ago, while at Waihi, the mine performed well as it worked through better grades of ore, Mr McIntyre said.
For the year to mid-December, gold started the year below $US1150 and rallied to a high of $US1350 by early September. By mid-December it was trading down in a range between $US1300-$US1250.
Mr McIntyre said Craigs' outlook for gold prices during 2018 was in a range of $US1230-$US1250.
He noted Oceana's crucial all-in sustaining costs (ASIC) of production had crept up more than 13% higher than Craigs' estimates during the third quarter. It was an issue for all mining companies.
''They do note they see strong organic growth, which should provide better control of ASIC,'' he said.
Oceana's strategy for 2017-20 was to focus on cost reduction and organic growth, he said.
''Copper [from the Philippines] offsets are a big part of this and we're very positive on the outlook for copper,'' Mr McIntyre said.
Oceana's most profitable mine, Didipio in the northern Philippines island of Luzon, produces copper and gold from an open pit, but is in the development stages of going underground.
The copper is sold as a by-product to gold production which means the cost of an ounce of gold is only a fraction of its other mines; especially Macraes, which is the most expensive mine in Oceana's stable.
For several months this year Oceana looked to become embroiled in sweeping changes to the mining sector in the Philippines, but it continued production unabated.
Despite the replacement in recent months in the Philippines of a pro-environmental mining minister for a more moderate one, Philippines President Rodrigo Duterte did not lift the first minister's ban on open-pit mining, a spokesman told Reuters in late November.
There had been plans by a government panel to seek the removal of the policy, Reuters reported.
''I assure you that this is one of the instances when I personally asked the president if there's been a change in policy. And he says that's there's still no new policy on this; there's still a ban on new open pit mining,'' Phillippines congressman Harry Roque told a media briefing at the time.
The Mining Industry Co-ordinating Council in the Philippines last month had recommended lifting the open pit mining ban and Environment Secretary Roy Cimatu had said he was hopeful the restriction would be removed before year-end.
Mr McIntyre said the ministerial changes in the Philippines and subsequent regulatory changes this year did not affect Oceana, but was an issue which had to be considered.
''Oceana have have worked very hard to be a good corporate citizen and fit into the community,'' he said.
Oceana's portfolio of assets was globally diverse so this lessened the overall risk posed by just one country, he said.
Mr McIntyre picked gold bullion as an insurance policy for portfolios, but the United States increasing its Federal Reserve funds rate, was likely to become a head wind for gold during 2018. However, he said gold did tend to perform well during periods of rising inflation expectations against a weak US dollar and during periods when financial stability risks were perceived as rising.
Oceana did have some headwinds to contend with in 2018 Mr McIntyre said, in production costs, political disruptions and the price of gold.
However, there were some offsetting tailwinds, too.
''They seem to be getting themselves into a sweet spot where they can maintain production, control costs and benefit from a higher copper prices, which lowers their ASIC,'' Mr McIntyre said.
Results and some assays to date have left Oceana bullish on the future of Macraes and Waihi.
''Their exploration pipeline looks promising,'' Mr McIntyre said.
While formally the Macraes pit life is set at 2019, Frasers underground 2020 and Waihi 2019, exploration results have prompted Oceana to say Macraes may have another decade to go.
Haile has been producing small amounts of gold for most of the year, it overcame plant commissioning issues and its gold production was formally included on the books from October 1.
