Record gold price offsets lower production, costs for OceanaGold

Friday 28th October 2011

Record world prices for gold offset higher costs, adverse exchange rate movements and reduced extraction rates at its two South Island mining sites for OceanaGold Corporation in the three months to Sept. 30.

OceanaGold reported earnings before interest, tax, depreciation, and amortisation , excluding losses on foreign exchange and hedge contracts of US$43.27 million, compared with US$32.99 million in the second quarter, but only slightly above ebitda of US$42.61 million in the same quarter a year earlier.

The key difference was a rise in the average price for an ounce of gold for the quarter to US$1,706, compared with US$1,546 in the second quarter and US$1,232 in the same quarter a year earlier.

On an after tax basis, also excluding hedge costs, OceanaGold reported a US$10.91 million profit in the third quarter, taking year to date net profit to US$29.83 million, compared with US$12.11 million for the same nine months a year earlier.

Earnings per share stood at 4 cents, compared with 2 cents per share in the previous quarter.

Total gold revenue in the third quarter of US$103.5 million was up 9.1 percent on the second quarter, although production was down 1.1 percent, at 59,090 ounces.

Grams per tonne of ore mined were down too, at 1.12 grams per tonne, compared with 1.23 g/t and recovery rates of 82.5 percent were also below the average for the year to date of 83.1 percent.

“The company’s forecast has production expectations at the lower end of full year production guidance range of 255,000 to 270,000 ounces of gold,” directors said in the earnings statement. “Cash cost guidance of US$850 to US$890 per ounce also remains unchanged.”

For the quarter under review, the US$160 per ounce increase in the average gold price over the previous quarter expanded cash margins to US$750 per ounce, with an offsetting increase of US$35 per ounce caused by a stronger New Zealand dollar, fewer ounces produced and less capitalised pre-stripping.

While there was a 24 percent increase in ore mined at the Frasers Underground mine in the Macraes goldfield, heavy snow and lower ore grades meant total gold production from the field was 42,136 ounces was down on the 44,107 ounces produced in the previous quarter (49,732 ounces in the same quarter a year earlier).

At Reefton, grams per tonne or ore mined were also lower than in the past couple of years, at 1.7 g/t, with yields expected to increase as the Souvenir open pit development deepens and reaches higher grades.

The company had struggled to keep and attract skilled labour, and had increased salary packages accordingly.

OceanaGold’s Didipio development in the Philippines had suffered delays and one employee death as a result of tropical typhoons, but the senior management team was now almost all in place, worker accommodation is near completion and concrete pours are expected in coming weeks.

BusinessDesk.co.nz

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