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OceanaGold dips into red in 3Q as margins squeezed

Wednesday 31st October 2012

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OceanaGold, which operates the Macraes gold mine near Dunedin, dipped into the red in the third quarter as its margins were squeezed, and expects to produce less gold at a higher cost.

The Melbourne-based company made a loss of US$397,000 in the three months ended Sept. 30, from a profit of US$10.9 million in the same quarter a year earlier, it said in a statement. Gold sales shrank 12 percent to US$91.2 million, even as the cost of sales rose 6.4 percent to US$61.2 million, reflecting a stronger local currency and the cost of processing low grade ore.

OceanaGold cut its annual production to between 225,000 and 230,000 ounces of gold at a cash cost US$1,000 to US$1,050 per ounce, from 230,000 to 250,000 ounces at a cost of between US$900 and US$980 an ounce.

"The adjusted range is consistent with the current market consensus based on analysts covering OceanaGold which is 228,650 ounces of gold from the New Zealand mines at US$1,023 per ounce," chief executive Mick Wilkes said. "The company has commenced mining higher grade ore at both Macraes open pit and Reefton and as a result we expect production to be higher in the fourth quarter."

Last week, OceanaGold said its investigations into mining scenarios at Blackwater, south of Reefton on New Zealand's Coromandel Peninsula, was showing mineralisation that was consistent with historical records. It expects to complete the study in the second half of next year.

The company's bottom line was also hit by a lower interest income and losses on gold put options and forward rate contracts to secure US dollar banking facilities. Earnings before interest, tax depreciation and amortisation sank 36 percent to US$27.6 million in the quarter from a year earlier.

OceanaGold produced 49,514 ounces of gold in the quarter, down from 59,090 ounces in the same quarter a year earlier, with a cash cost of US$1,081 per ounce sold, up from US$956 an ounce.

Construction at its Didipio project in the Philippines was almost complete and will start milling in November, it said.

The spot price for gold rose 11 percent to US$1,777.29 an ounce in the September quarter. Since then the price has dropped and recently traded at US$1,709.34 an ounce.

OceanaGold shares, which are listed in Australia, New Zealand and Canada, fell 2.7 percent to $3.98 on the NZX yesterday, and have rallied 48 percent this year.

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