East Otago-based Oceana Gold has bought Newmont Mining Corp's North Island Waihi operations for $US101 million ($NZ132.3 million), offering surety Oceana's New Zealand operations will continue for several years.
The combined operations will this year employ about 1000 staff in New Zealand and overall gold production next calendar year will be potentially well beyond 400,000oz, including Philippine contributions.
In the face of rising costs and gold price volatility, Oceana has shed almost 300 staff and contracting jobs from Macraes in Otago and Reefton on the West Coast, as part of a $US100 million efficiency drive during the past two years.
Oceana is already the country's largest gold miner and has expectations of producing up to 335,000 ounces of gold this year, from the South Island and the Philippines.
The North Island acquisition is expected to contribute a further 100,000oz annually.
Oceana chief executive Mick Wilkes said Waihi represented a unique opportunity to acquire a high-quality asset which had demonstrated an ability to repeatedly extend its mine life during the past 27 years ''in what is still a very prospective, high-quality goldfield''.
''We've long believed that Waihi represents a strong strategic fit within Oceana Gold. We're excited about the prospect of acquiring it and welcoming its experienced workforce to our team,'' he said.
In an interview, Mr Wilkes said there would be several ''synergies'' from the acquisition, including underground mine management, expertise and experience, equipment and procurement from suppliers.
The intended purchase is subject to gaining regulatory approvals and will be paid for from a mix of cash reserves and drawing down of existing debt facilities.
The acquisition is to contribute to Oceana's balance sheet from July 1.
The Frasers underground mine in East Otago recently got a mine life reprieve, being extended out to 2016 and the open pit operations might also yet be extended beyond 2017, but a cloud still hangs over Reefton operations.
When asked, Mr Wilkes said the Waihi acquisition would not offset the planned mothballing of the Reefton open pit operations, at the end of 2015.
Each mine in Oceana's expanding portfolio had to justify its production costs, Mr Wilkes noting he ''didn't expect any significant long-term recovery,'' in the price of gold, which has undermined Reefton's viability for the past two years.
All operations at Waihi were expected to continue as ''business as usual''.
Its gold would continue to be smelted into rough ''dore'' (unrefined gold-silver-alloy) bars, for export and minting, Mr Wilkes said.
A review of operations would take place after the June. Expectations were the workforce would be unchanged and capital expenditure, such as that on developing the underground Correnso mine, would be financially backed by Oceana.
Exploration spending above and below ground would continue at Waihi, at about $5 million per year, which would include gold veins near the old, still-closed, Martha pit.
Mr Wilkes had set a ''cut off'' selling price of about $US1250 per oz for New Zealand operations in March, and said yesterday that rule of thumb was unchanged.
However, he believed Waihi's overall cost of production could reduce overall New Zealand operation costs in the future.
Oceana's quarterly result released yesterday revealed strong actual production for the quarter, of 92,712 ounces of gold produced, compared with 91,146 a year ago.
The return from gold sales was down from $US170.3 million a year ago to $US129.3 million.
After-tax profit declined from $US58.9 million to $US24.4 million.
Commodity prices for both gold and copper were down for the quarter, but cash costs to produce an ounce were kept low, despite climbing from $US369 last year to $US402.
Debt was reduced by $US13.4 million and $US8.4 million went to cash in hand, which stood at $US59.6 million.
The numbers
Newmont Mining Corp
• Waihi mine - 340 staff
• Martha Pit - 1880s-1952. Modern Martha opened in 1988, underground mines since 2005; the latest being Correnso. Favona and Trio now closed.
• Plant capacity to annually process 1.3 million tonnes of ore.
• Estimated gold reserves, 360,000oz, from 2 million tonnes of ore at grade of 5.52oz per tonne.
• Estimate 100,000oz gold annually from Correnso, through to 2018.
• Since 1988 - Produced more than 2.7 million ounces gold, 18.9 millon ounces of silver.
• Last calendar year, 131,518oz gold, 482,000oz silver.
• As at December, estimated 400,000oz gold reserve.
• All Newmont mines last year - 5.23 million oz gold in total.
Oceana Gold
• Macraes: 500 staff; Reefton: 250.
• Produced more than 4 million ounces since 1990.
• Last calendar year 307,463 oz. Estimate this year 295,00-335,000, combined South Island-Philippine production (plus 23,000 tonnes copper)
Source: Oceana Gold/Newmont Mining Corp
