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OceanaGold 2Q profit plunges 82% on falling gold prices

Friday 27th July 2012

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OceanaGold Corp, which operates the Macraes gold field near Dunedin, saw second-quarter profit plunge 82 percent as falling gold prices eroded earnings and led to a six-month loss.

Net profit was US$735,000 in the three months ended June 30, down from US$4.1 million in the same period a year earlier, the Melbourne-based company said in a statement. That was an improvement on the first three months of the year when its bottom line sank into the red. The gold miner reported a net loss of US$3.1 million for the six-month period, compared to a profit of US$18.9 million a year earlier.

Earnings before interest, tax, depreciation and amortisation dropped 22 percent to US$25.6 million in the quarter, with sales down 8.5 percent to US$86.7 million.

"The New Zealand operations achieved good production improvement this quarter and remain on track to meet full-year guidance," chief executive Mick Wilkes said. "Didipio construction is at peak levels and progressing on schedule to commission in the fourth quarter of 2012."

Last week the gold miner launched an investigation into the death of a contract worker at the site of its Didipio mine project in the Philippines after a severe storm hit the construction site. The project is set to run over budget by US$35 million to US$220 million due to engineering design and procurement services, the tailings storage facility, and infrastructure construction and support costs.

Gold production fell to 5,709 ounces in the second quarter from 61,988 ounces a year earlier. The average price received was US$1,613 per ounce, an improvement on the US$1,546/oz achieved in 2011, though at a smaller margin of US$584/oz compared to US$625/oz.

The company retained its 2012 production guidance of between 230,000 ounces and 250,000 ounces of gold at cash costs of US$900 to US$980 an ounce, and assumes an exchange rate of 80 US cents per New Zealand dollar.

The shares, which are listed in New Zealand, Australia and Canada, fell 2.9 percent to $2.45 yesterday, and have dropped 13 percent this year.

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