Oceana Gold is taking over the Frasers underground mining contract, which was costing it about $25 million per year, and is offering the contractor's 100 staff employment with Oceana.
Australian-based Byrnecut Mining has been contracted at the East Otago Macraes site to mine Frasers - which cost $US54 million ($NZ75.8 million) to develop - since April 2006, with the tunnel fully commissioned in January 2008.
Oceana chief operating officer Mark Cadzow said the company would maintain manning levels and would offer employment to Byrnecut's 100 employees, plus Byrnecut would act in an advisory role until September.
Frasers has about 125 staff.
"The main advantage is leveraging off other parts of the [open pit] operation and utilising those synergies to reduce costs," Mr Cadzow said.
Oceana recently got out of its forward contract hedging arrangements to sell all its gold on the global spot market and expects an extra $70 million-$80 million if prices remain around the $US1100 per ounce level. Prices spiked yesterday above $US1200.
About 1 million tonnes of ore is taken out of Frasers annually. It is forecast to deliver 55,000-65,000oz of gold annually for three years.
However, the extent of the ore body remains undefined at depths beyond the present 580m.
Test drilling in adjacent areas recently delivered "promising results" of "significant" grades.
