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Lower production, high dollar push OceanaGold to 1Q loss

Friday 27th April 2012

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OceanaGold Corp, which operates the Macraes gold field near Dunedin, posted a first-quarter loss after it pulled less gold out of the ground and had to contend with a tough foreign exchange environment.

The company made a net loss of US$3.9 million, or 0.1 US cents per share, in the three months ended March 31, compared to a profit of US$14.8 million, or 0.6 US cents, a year earlier. Earnings before interest, tax, depreciation and amortisation plunged 47 percent to US$23.3 million as its cost of sales spiked 38 percent from a year earlier.

The company’s margins were squeezed by “lower ounces produced and adverse foreign exchange rate movements” and it is reviewing its cost management, it said in its analysis of the quarter. Production in New Zealand was lower due to planned maintenance shutdowns at the Macraes and Reefton operations.

Gold prices have more than doubled since the global financial crisis as investors sought safe places to park their money, reaching a record high US$1,920.30 an ounce in September last year. The price was recently at US$1,654.69.

The average gold price OceanaGold received in the quarter was US$1,708 an ounce, in line with the three months ended Dec. 31, but the operating cost per ounce climbed to USUS$1,126 from US$890 in the prior quarter.

The company’s revenue fell 2.3 percent to US$88.6 million from a year earlier, and OceanaGold’s operating profit plunged to US$3 million from US$24.4 million in the first three months of 2011.

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 company expects gold production in the second half of the year to be greater than the first half as the production of the higher grade gold from Frasers Stage 5 at Macraes Goldfields commences, Frasers Underground returns to normal operating levels following redevelopment of access to certain stoping areas, and increased mining rates at Reefton,” it said.

“As a result of the higher production expected in the second half, cash costs are expected to be lower in this period assuming constant exchange rates,” the company said.

OceanaGold said it expects its Didipio project in the Philippines is due to start in the fourth quarter of this year.

The company produced 50,842 ounces of gold in the quarter, compared to 65,671 ounces a year earlier. It sold 51,852 ounces in the quarter, down from 64,765 ounces in 2011.

The shares, which are listed in New Zealand, Australia and Canada, were unchanged on the NZX at $2.85.

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