OceanaGold Corporation - Management's discussion and analysis of financial condition and results of operations for the three months ended June 30, 2007



    /NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES AND NOT FOR
    DISTRIBUTION TO US NEWSWIRE SERVICES/

    MELBOURNE, Australia, Aug. 14 /CNW/ -

    
    HIGHLIGHTS

    -   The Oceana Group restructured to a Canadian corporation with a
        Canadian TSX listing.

    -   OceanaGold Corporation completed an IPO on the TSX; raising
        C$100.7 million of gross proceeds at C$3.50 per share, subsequent to
        quarter end, completing the financing for the Didipio Gold & Copper
        Project.

    -   Construction activity at Didipio in the quarter accelerated as
        planned, with the signing of key contracts and the continued
        advancement of site access works.

    -   Gold production totalled 40,255 ounces with a significantly improved
        average gold price received and an increased cash operating margin.

    -   Frasers underground mine development progressed well and remains on
        schedule to commence operations at the beginning of 2008.

    -   Diamond drilling results from the Golden Point Extension area
        provided indication of the existence of a new underground deposit at
        Macraes.

    -   Exploration drilling intersected high-grade mineralisation at the
        Crushington prospect, Reefton Goldfield.
    

    Full Company Release

    To view the full company release, including images and appendices place
access the link below or go to the company website www.oceanagold.com
    http://www.oceanagold.com.au/images/stories/Oceana%20MDA%20Q2%20-%20MASTE
R%20Final.pdf

    
    (*)  All statistics are compared to the corresponding 2006 quarter.

    (xx) OceanaGold has adopted USD as it presentation currency, the
         financial statements are presented in USD and all numbers in this
         document are expressed in USD unless otherwise stated.


                               GROUP OVERVIEW
    

    North American Listing

    During the second quarter, OceanaGold completed a restructure whereby the
parent company became a Canadian corporation with a Toronto Stock Exchange
(TSX) listing.
    As part of this process, the Company ceased trading as Oceana Gold
Limited (stock code "OGD") and restarted trading as OceanaGold Corporation
(stock code "OGC") on June 27, 2007, after the completion of a five for one
share consolidation.
    The Company subsequently completed a TSX initial public offering (IPO) on
July 5, 2007. The IPO raised C$90,002,500 from the issue of 25,715,000 common
shares at C$3.50 per share. On July 25, 2007 the syndicate of underwriters
exercised their over-allotment option which raised an additional C$10,710,000
from the issue of 3,060,000 common shares at C$3.50 per share.
    Net proceeds from both of these transactions will be used for the
development of the Didipio Gold and Copper Project in the Philippines and for
general corporate purposes.
    The Company is now traded under the symbol "OGC" on the Toronto Stock
Exchange (TSX), Australian Stock Exchange (ASX) and New Zealand Stock Exchange
Limited (NZX).

    Management

    Patrick Goodfellow has been appointed to the position of Vice President,
Philippines, based in Manila. He will be responsible for OceanaGold's business
unit in the Philippines, including the development of the Didipio Gold and
Copper Project. Patrick has been involved in the mining industry for over
27 years and has extensive experience in project development throughout
Australasia and Africa.
    Darren Klinck has been appointed OceanaGold's Vice President, Corporate
and Investor Relations. Darren will increase OceanaGold's market exposure and
build relationships with investor and financial networks internationally.
    Employment of key personnel for the Didipio Gold and Copper Project
continued, including the appointment of the Site General Manager, Jake
Foronda.

    Results from Operations

    Gold revenue in the second quarter of 2007 was as expected, lower than
the comparative quarter of 2006. This was primarily due to the processing of
significant quantities of lower grade stockpiled ore, whilst overburden is
removed to expose deeper ore in the Frasers Stage 4 pit at Macraes. There was
also some impact due to the slower than expected ramp up to full production at
the Globe Progress mine.
    The lower gold production was partially offset by a significant rise in
the average gold price received per ounce. This increased 30% to $698 per
ounce due to a combination of continued higher gold spot prices, the continued
benefits of the hedge restructure completed in 2006 and the positive impact of
the gold put options.
    As a result of the reduced production, cash costs per ounce sold were 39%
higher at $544 per ounce compared to the equivalent quarter of 2006. However
cash costs per tonne processed were reduced by 11% to $11.23 per tonne despite
higher fuel and electricity costs, due to higher throughput rates and
increased mill availability.
    The increased average gold price received more than offset the higher
costs and produced a cash operating margin of $154 per ounce sold, 5% higher
than the comparative quarter in 2006.
    Year to date, the average gold price received has increased 36% to $664
per ounce sold, this has more than offset the increase in cash costs per ounce
to $481 per ounce, which is due to the lower mill feed grades and gold
production.

    Development Update

    The development of the Frasers Underground mine progressed well in the
quarter and remains on schedule to commence commercial operations at the
beginning of 2008. Development progressed 1,276 metres in the quarter to a
total of 3,967 metres project to date. Panel 1 was accessed during the quarter
and initial stope development has now commenced.
    Progress on the Didipio Gold and Copper Project development remains on
schedule with the project further advanced in the second quarter. The EPCM and
other key contracts were awarded along with the commencement of final
engineering studies. Site access road improvements continued on schedule and
the recruitment of key project personnel progressed well during the quarter.

    2007 Guidance

    Company guidance for 2007 gold production remains unchanged at 190,000 -
205,000 ounces. With the slower ramp-up of Reefton, the company expects
production to be in the bottom end of this range.

    
                                 - Table 1 -
                   Key Financial and Operating Statistics

    -------------------------------------------------------------------------
                                                          Six         Six
                                 Quarter     Quarter     Months      Months
                                Ended 30    Ended 30    Ended 30    Ended 30
    Financial Statistics        Jun 2007    Jun 2006    Jun 2007    Jun 2006
    -------------------------------------------------------------------------

    Gold Sales (Ounces)           38,085      44,703      76,812      96,724

                                  USD         USD         USD         USD
                                  ---         ---         ---         ---

    Average Price Received
     ($ per ounce)                   698         538         664         490
    Cash Operating Cost
     ($ per ounce)                   544         392         481         344
    Cash Operating Margin
     ($ per ounce)                   154         146         183         146

    Non-Cash Cost
     ($ per ounce)                   192         120         152         103
    Total Operating Cost
     ($ per ounce)                   736         512         633         447

    Total Cash Operating Cost
     ($ per tonne)                 11.23       12.58       10.59       12.71
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                          Six         Six
                                 Quarter     Quarter     Months      Months
                                Ended 30    Ended 30    Ended 30    Ended 30
    Operating Statistics        Jun 2007    Jun 2006    Jun 2007    Jun 2006
    -------------------------------------------------------------------------

    Gold produced (ounces)        40,255      46,973      76,510     100,161

    Total Ore Mined (tonnes)   1,220,442   1,300,353   2,120,413   2,917,389
    Ore Mined grade (grams/
     tonne)                         1.24        1.22        1.22        1.22

    Total Waste Mined
     (tonnes) - incl pre-
     strip                    13,857,646  13,089,327  27,762,386  25,576,057

    Total Material Mined
     (tonnes) - incl pre-
     strip                    15,078,088  14,389,680  29,882,799  28,493,446

    Mill Feed (dry milled
     tonnes)                   1,572,704   1,392,602   2,966,303   2,616,902
    Mill Feed Grade (grams/
     tonne)                         0.89        1.29        0.93        1.44
    Recovery (%)                   76.7%       81.6%       79.6%       82.6%

    Total Autoclave feed
     (concentrate tonnes)
     (dry with lime)              32,308      35,851      61,568      76,343
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                                          Six         Six
                                 Quarter     Quarter     Months      Months
                                Ended 30    Ended 30    Ended 30    Ended 30
    Financial Statistics        Jun 2007    Jun 2006    Jun 2007    Jun 2006
    -------------------------------------------------------------------------

    EBITDA (excluding
     unrealized hedge
     gains)                        2,787       4,893       8,191       9,296
    Profit/(loss) after
     income tax (excluding
     unrealized hedge gains)      (4,065)     (1,302)     (4,365)     (1,978)

    Reported EBITDA               33,496         (78)     23,444     (31,836)
    Reported Profit/(loss)
     after income tax             16,510      (4,633)      5,854     (29,536)
    -------------------------------------------------------------------------


                                 OPERATIONS
    

    Macraes (New Zealand)

    The Macraes Gold Mine recorded excellent safety performance for the
quarter, achieving zero lost time injuries, compared to two for the same
period in 2006.
    Gold production of 31,826 ounces during the Second Quarter of 2007 was
lower than the 46,973 ounces produced in the corresponding quarter of 2006.
The variance is the result of processing lower grade transitional ore and
stockpiles partially offset by some gold production from the Frasers
Underground. This was anticipated in our 2007 budget as a necessary
consequence of the overburden stripping campaign to expose deeper ore in the
Frasers 4 pit.
    Total material moved in the second quarter was 12.4 million tonnes
compared to 14.9 million tonnes in 2006. Ore delivered to the ROM pad was 8%
lower than the previous quarter. The overall mine grade to the ROM pads for
the quarter averaged 0.78g/t compared to 1.25g/t in 2006 and was in part due
to moving lower grade stockpiled material to the ROM pad (as anticipated in
the 2007 plan).
    Frasers Underground had higher than predicted mining activity with ore
tonnes mined exceeding budget (140,642 versus 106,184 tonnes) for the quarter.
The overall grade of the ore was 1.77g/t and reflects development grade ore
along the footwall contact. Mining in the trial stope area is occurring. This
initial trial mining is intended to perfect ground control and grade control
parameters. To date the mining method is generally performing to expectations.
    Processing throughput for the quarter was 1,436,513 tonnes compared to
1,392,602 the previous year. The increase is due to improved mill availability
of 94% compared to 93% the previous year and the lower hardness of the
stockpile material.
    Reefton concentrate accounted for 8,429 produced ounces. The remainder of
the produced ounces came from the Macraes operation (Macraes open pit and
Frasers Underground).
    Overall recovery was 76.7% for the quarter compared to 81.6% for 2006.
The lower grade of the processed material generated an expected lower
flotation recovery.

    Globe Progress Open Cut Mine (New Zealand)

    Safety performance was excellent with only one Lost Time Injury recorded
in the quarter.
    Total material mined in the quarter was close to target. Ore movements
were limited by the ramp up of the processing plant, resulting in a buildup of
ore stockpiles.
    The processing plant was commissioned and producing concentrate at the
end of the first quarter, and ramp up to full production was progressively
completed over the second quarter. Debottle-necking and some modifications
were required in the crushing, flash flotation, and concentrate handling
sections of the plant. By July, concentrate production above design capacity
had been achieved.
    The concentrate produced and railed to Macraes mine since commissioning
is almost double the target grade at 47 grams per tonne. This has a very
favourable effect on transportation costs.
    Mining costs have been well below budget, as have other production costs
due to the lower production rates.

    
                                 - Table 2 -
                         Macraes Operating Statistics

    -------------------------------------------------------------------------
                                                          Six         Six
                                 Quarter     Quarter     Months      Months
    Macraes Goldfield           Ended 30    Ended 30    Ended 30    Ended 30
    Operating Statistics        Jun 2007    Jun 2006    Jun 2007    Jun 2006
    -------------------------------------------------------------------------

    Gold produced (ounces)        31,826      46,973      68,056     100,161

    Total Ore Mined (tonnes)     997,449   1,300,353   1,789,912   2,917,389
    Ore Mined grade (grams/
     tonne)                         1.00        1.22        1.04        1.22

    Total Waste Mined
     (tonnes) - incl pre-
     strip                    10,839,593  13,089,327  21,579,824  25,576,057

    Total Material Mined
     (tonnes) - incl pre-
     strip                    11,837,042  14,389,680  23,369,736  28,493,446

    Mill Feed (dry milled
     tonnes)                   1,436,513   1,392,602   2,829,499   2,616,902
    Mill Feed Grade (grams/
     tonne)                         0.89        1.29        0.93        1.44
    Recovery (%)                   76.3%       81.6%       79.6%       82.6%

    Total Autoclave feed
     (concentrate tonnes)
     (dry with lime)              32,308      35,851      61,568      76,343
    -------------------------------------------------------------------------


                                 - Table 3 -
                         Reefton Operating Statistics

    -------------------------------------------------------------------------
                                                          Six         Six
                                 Quarter     Quarter     Months      Months
    Reefton Goldfield           Ended 30    Ended 30    Ended 30    Ended 30
    Operating Statistics        Jun 2007    Jun 2006    Jun 2007    Jun 2006
    -------------------------------------------------------------------------

    Gold produced (ounces)         8,429         n/a       8,454         n/a

    Total Ore Mined (tonnes)     222,993         n/a     330,501         n/a
    Ore Mined grade (grams/
     tonne)                         2.34         n/a        2.23         n/a

    Total Waste Mined
     (tonnes) - incl pre-
     strip                     3,018,053         n/a   6,182,562         n/a

    Total Material Mined
     (tonnes) - incl pre-
     strip                     3,241,046         n/a   6,513,063         n/a

    Mill Feed (dry milled
     tonnes)                     136,191         n/a     136,804         n/a
    Mill Feed Grade (grams/
     tonne)                         2.43         n/a        2.43         n/a
    Recovery (%)                   74.4%         n/a       74.1%         n/a
    -------------------------------------------------------------------------


                             DEVELOPMENT PROJECTS
    

    NEW ZEALAND

    Frasers Underground Mine

    Frasers Underground development continued on schedule with development
progressing 1,276 metres in the quarter to a total of 3,967 metres (Figure 1)
project to date. Panel 1 was accessed during the quarter and initial stope
development has now commenced. The project remains on schedule to commence
production at the beginning of 2008.
    Production from the trial stopes began at the start of the second quarter
and stope performance to date is generally in line with expectations. A higher
proportion of ore was recovered from the development than budgeted, although
development ore grade during the quarter was lower than expected. The main and
vent declines were developed in areas outside the resource estimate that were
found to contain low grade ore rather than the expected waste.
    During the quarter excavation of the primary vent and escapeway raise
collars commenced in preparation for the start of pilot hole drilling
(Figure 1).

    PHILIPPINES

    Didipio Gold and Copper Project

    The Didipio Gold and Copper Project development comprises four years of
open cut mining, followed by at least 11 years of underground sub-level caving
operations, totalling an expected minimum 15 years of processing operations.
    The project is designed for a throughput of two and a half million tonnes
of ore per annum and annual metal production will average approximately
227,000 gold equivalent ounces (Au Eq) in the first ten years of production,
comprising some 120,000 ounces of gold and 15,000 tonnes of copper in
concentrate.
    Progress on the Didipio Gold and Copper Project development remains on
schedule and on budget.
    During the second quarter, project development further advanced with the
award of the EPCM contract to Ausenco and the underground mine drainage tunnel
contract to McConnell Dowell.
    Value engineering was completed by Ausenco to confirm the process flow
and equipment list generated.
    Site access road improvements continued with progress on track for
completion by the end of September 2007.
    Employment of key project personnel continued, including the appointment
of the Site General Manager.
    Long lead time equipment has been ordered and the fabrication of the mill
shells commenced in South Africa during the quarter. In addition, key
equipment required for the development of the underground drainage tunnel has
been ordered and is on schedule.
    The tailings dam concept design was peer reviewed and the detailed design
commenced during the quarter.

    
                                 EXPLORATION
    

    NEW ZEALAND

    Exploration expenditure in New Zealand for the quarter was $0.7 million.

    Macraes Goldfield

    Diamond drilling to test for a new zone of mineralisation down dip from
Golden Point open pit continued in the second quarter. Two holes were
completed for a total of 562.5m drilling.
    Assay results confirm mineralisation widths and grade (Table 4) that are
consistent with previous mineralisation intersected in the area. The results
indicate that mineralisation has continuity within the host shear zone
structure.
    The mineralised structure is open to the east and north and further
drilling has been planned to test for higher grade zones to the east and
down-dip of the current drilling (Figure 3). This work is scheduled to be
completed later in 2007.

    
                                 - Table 4 -
                           Golden Point Extension
                 Significant Diamond Drilling Intersections
    -------------------------------------------------------------------------
    Prospect       Hole ID     From       To     Length      True     Grade
                               (m)       (m)       (m)      Width    (g/t Au)
                                                             (m)
    -------------------------------------------------------------------------
    Golden         RCD4893     289       296        7         7         2.19
    Point                      299       301        2         2         1.72
    Extension
                   RCD4894     293       304       11        11         2.08
    -------------------------------------------------------------------------
    

    Infill diamond drilling commenced at the Frasers Underground Panel 2
Extension in order to increase geological confidence in the resource for the
area. A total of 18 deep diamond drill holes are planned for the Extension
area, which will increase the drill hole density to a nominal 50m x 50m grid.
A total of 1,752.6m drilling was completed for the quarter and two holes
successfully intersected the mineralised hanging wall shear zone.
    Assay results were received for holes RCD4897 and RCD4898 (Table 5). The
grade and width of the mineralised hangingwall structure was within the
expected range based on intersections from the surrounding holes.

    
                                 - Table 5 -
                Frasers Underground Panel 2 Extension Diamond
                           Drilling Intersections

    -------------------------------------------------------------------------
    Prospect       Hole ID     From       To     Length      True     Grade
                               (m)       (m)       (m)      Width    (g/t Au)
                                                             (m)
    -------------------------------------------------------------------------
    FRUG P2        RCD4897     570       578        8         8         2.08
    Extension                  580       587        7         7         1.49
                               561       568        7         7         4.25
                   RCD4898     568       581       13        13         1.79
    -------------------------------------------------------------------------
    

    Reefton Goldfield

    Testing of the Crushington prospect, approximately 3km north of the Globe
Operation (Figure 6) continued during the quarter. Drilling was completed on
only 3 diamond drill holes (RDD0047 - RDD0049) for a total of 405.6m of core
drilling.
    Assays were received for drill holes completed at the Auld Creek and
Crushington prospects. (Table 6). Hole RDD0048 at Crushington intersected two
zones of disseminated mineralisation, both of which were associated with
historical mining voids. Mineralised rocks included some quartz breccia but no
significant pug breccia zones. Assay results confirmed the presence of
high-grade gold in the upper zone (Table 6) within a halo of lower-grade
mineralisation around the previously mined lode structures. Drilling will
continue during the next quarter to test this prospect for Globe-Progress
style mineralised structures.

    
                                 - Table 6 -
             Reefton Significant Diamond Drilling Intersections

    -------------------------------------------------------------------------
    Prospect       Hole ID     From       To     Length      True     Grade
                               (m)       (m)       (m)      Width    (g/t Au)
                                                             (m)
    -------------------------------------------------------------------------
    Auld Creek     RDD0046      34        35        1         -         0.51
    Crushington    RDD0047     177       178        1        0.7        0.60
                               269       270        1        0.7        0.88
                   RDD0048      42        51        9        6.4        1.34
                                52        56        4        2.8       11.04
                               100       101        1        0.7        0.84
    -------------------------------------------------------------------------
    

    Third Quarter 2007 Activities

    The diamond drill rig at the Macraes Operation will continue infill
drilling of the Frasers Underground Panel 2 Extension and the work is
scheduled for completion in time to allow a resource update to be completed by
December 2007.
    In the Reefton Goldfield, the exploration diamond drilling program will
continue at the Crushington prospect.

    PHILIPPINES

    During the quarter $0.7 million was spent on exploration activities.

    Didipio Gold and Copper project

    A 10 hole, infill diamond drilling program for 4,850m is currently
underway. This infill drilling has been undertaken to infill the resource for
mine planning and resource evaluation to a level compliant with Canadian
reporting standards.
    Infill drilling progressed during the quarter with four drill holes
completed and a fifth hole nearing completion.

    Other Philippines Exploration

    Papaya and Runamok Projects (FTAA 001)

    Exploration work has started on the Papaya Project (Figure 10). All
historical Climax data has been collated in the GIS, maps and reports. Work to
date includes additional stream mapping and sediment sampling. A soil grid is
planned to investigate a mineralised fault found near the edge of the
mineralised monzonite intrusive. Exploration work on the Runamok prospect is
expected to begin in December 2007.

    Manhulayan Project

    At Manhulayan the regional NCIP clearance was received and endorsed to
the Manila Commission. We expect the permit to be approved by the MGB in
August 2007.
    Meanwhile data collation, interpretation and planning for the upcoming
fieldwork are continuing.

    Paco Project

    During the quarter, stream sediment sampling and float mapping was
carried out in a number of areas that have suitable structural similarities
with known deposits nearby.

    Planned Third Quarter 2007 Activities

    At Didipio Mine Site, the diamond drill rig will carry on drilling infill
underground and open pit targets.
    Exploration of Papaya prospect within the FTAA will start with stream
sediment sampling and detailed mapping and a soil grid will be surveyed and
sampled to determine optimum drill targets.
    At the Manhulayan Project, the access road will be started as soon as the
tenement is granted and a temporary camp built near Costan Village for use
during fieldwork and drilling.
    At the Manag Project, NCIP will undertake final meetings with the local
people to complete the access MOA.


    
                              FINANCIAL SUMMARY

    The table below sets out selected financial data relating to the quarter
and six months ended June 30, 2007, with comparative data from the quarter and
six months ended June 30, 2006.

    -------------------------------------------------------------------------
                                    Quarter    Quarter Six Months Six Months
                                      Ended      Ended      Ended      Ended
                                    June 30    June 30    June 30    June 30
                                       2007       2006       2007       2006
    INCOME STATEMENT                  $'000      $'000      $'000      $'000
    -------------------------------------------------------------------------
    Gold sales                       22,644     24,063     43,413     47,287
    -------------------------------------------------------------------------
    Cost of sales, excluding
     depreciation and
     amortization                    17,316     16,622     30,749     32,158
    -------------------------------------------------------------------------
    Other expenses                    2,687      2,633      4,660      5,918
    -------------------------------------------------------------------------
    Other income                        146         85        187         85
    -------------------------------------------------------------------------
    Earnings before interest,
     tax, depreciation &
     amortization (EBITDA)
     (excluding unrealised
     gain/(loss) on hedges)           2,787      4,893      8,191      9,296
    -------------------------------------------------------------------------
    Depreciation and amortization     6,533      5,352      9,980      9,905
    -------------------------------------------------------------------------
    Net interest expense              3,295      1,048      5,543      1,965
    -------------------------------------------------------------------------
    Profit/(loss) before income
     tax and unrealized gain/(loss)
     on hedges                       (7,041)    (1,507)    (7,332)    (2,574)
    -------------------------------------------------------------------------
    Profit/(loss) after income
     tax and before unrealized
     gain/(loss) on hedges           (4,065)    (1,302)    (4,366)    (1,978)
    -------------------------------------------------------------------------
    Release from OCI of deferred
     unrealized loss on designated
     hedges                          (8,162)    (7,183)   (17,242)    (7,183)
    -------------------------------------------------------------------------
    Gain / (loss) on fair value of
     undesignated hedges             38,871      2,212     32,495    (33,949)
    -------------------------------------------------------------------------
    Tax on unrealized gain/(loss)
     on hedges                       10,134     (1,640)     5,033    (13,574)
    -------------------------------------------------------------------------
    Profit/(loss) after income tax   16,510     (4,633)     5,854    (29,536)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Basic & diluted earnings/
     (loss) per share (cents)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    CASHFLOW
    -------------------------------------------------------------------------
    Cashflows from Operating
     Activities                        (985)     1,839      7,320      5,740
    -------------------------------------------------------------------------
    Cashflows from Financing
     Activities                       3,299     (1,336)    50,626     (2,763)
    -------------------------------------------------------------------------
    Cashflows from Investing
     Activities                     (35,865)    (5,589)   (72,591)    (6,817)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                                      As at      As at
                                    June 30 December 31
                                       2007       2006
    BALANCE SHEET                     $'000      $'000
    -------------------------------------------------------------------------
    Total Current Assets            122,607    120,711
    -------------------------------------------------------------------------
    Total Non Current Assets        598,785    503,018
    -------------------------------------------------------------------------
    Total Assets                    721,392    623,729
    -------------------------------------------------------------------------
    Total Current Liabilities        77,852     91,185
    -------------------------------------------------------------------------
    Total Non Current Liabilities   309,091    243,384
    -------------------------------------------------------------------------
    Total Liabilities               386,943    334,569
    -------------------------------------------------------------------------
    Total Shareholders' equity      334,449    289,160
    -------------------------------------------------------------------------
    

    RESULTS OF OPERATIONS

    Sales Revenue
    -------------
    Gold revenue in the second quarter was lower than the comparative quarter
in 2006 due to the reduced gold production as a result of reduced mill feed
grade at Macraes associated with the high percentage of low grade stockpile
processed while overburden removal is conducted to access higher grade ore in
the Frasers Stage 4.
    The lower gold production was largely offset by a significant rise in the
average gold price received per ounce sold. This increased 30% to $698 per
ounce due to the combination of continued higher gold spot prices and the
continued benefits of the hedge restructure completed in 2006. During the
quarter 28% of gold sales were sold into forward sales contracts compared to
55% sold into forward contracts in the equivalent quarter of 2006.
    Year to date sales revenue is also lower than the comparative period in
2006, due to lower gold production associated with the reduced mill feed
grade. This has been offset by a 36% increase in the average gold price
received to $664 per ounce sold.

    Unrealized hedge gains
    ----------------------
    In the second quarter of 2007 unrealized hedge gains recorded in the
Statement of Earnings/(Loss) were $30.7 million compared with unrealised hedge
losses of $5.0 million in the same quarter of 2006.
    In the half year ended 30 June 2007 unrealized hedge gains recorded in
the Statement of Earnings/(Loss) were $15.3 million compared with unrealised
hedge losses of $41.1 million in the same period of 2006.
    These amounts are a function of movements in the spot gold price.
    The unrealized hedge gains or losses required to be brought to account do
not represent a realized gain or loss incurred by OceanaGold and therefore
have no influence upon the cash revenue generated in the period, nor does the
accounting for unrealized hedges reflect their real value in terms of locking
in a future price that exceeds the cost of production, or their value as a
prudent approach to risk management.
    The derivative instruments used to manage the risk of adverse movements
in gold prices and FX rates are discussed below.

    Operating Costs & Margins
    -------------------------
    As a result of the reduced production associated with lower mill feed
grades, cash costs per ounce sold in the quarter were 39% higher at $544 per
ounce. Cash costs per ounce sold in the half year ended 30 June 2007 were 40%
higher at $481 per ounce.
    However, cash costs per tonne processed reduced 11% to $11.23 per tonne,
due to higher throughput rates and increased mill availability. On a year to
date basis cash costs per tonne processed have reduced 17% to $10.59 driven by
increased throughput rates, mill availability and other efficiencies.
    The increasing exposure to the spot gold price and the consequential
increase in the average gold price received produced a cash operating margin
of $154 per ounce sold, 5% greater than the comparative quarter in 2006,
despite the cost increases noted above. On a year to date basis cash operating
margin has increased 25% to $183 per ounce sold.
    This increased margin per ounce was critical to producing earnings before
interest, tax, depreciation & amortisation (EBITDA) (excluding unrealized
hedge losses) of $2.8 million in the quarter and $8.2 million in the half year
ended 30 June 2007, despite the reduced sales volumes and higher cash costs.

    Depreciation and Amortization
    -----------------------------
    Depreciation and amortization charges are calculated on a units of
production basis and are consequently lower for the Macraes operations in the
second quarter of 2007 compared with the second quarter of 2006. However, the
start of operations at the Globe Progress Mine and the associated start of
depreciation of these assets have more than offset this in the quarter. On a
year to date basis the lower production in 2007 has resulted in a depreciation
expense similar to the comparative period in 2006 despite the start up at
Globe Progress.

    Interest expense
    ----------------
    The increased interest expense in the second quarter and first half of
2007 is a result of the higher levels of debt carried by OceanaGold through
the periods compared with the comparative periods of 2006. This increased debt
relates to the convertible notes issued in December 2006 and March 2007, the
project debt facility drawn in late 2006 and higher finance lease liabilities,
all associated with financing the company's mine development program.

    Profit/(Loss) after Tax
    -----------------------
    The company reported total profit after tax in the second quarter of 2007
of $16.5 million compared with a loss after tax of $4.6 million in the second
quarter of 2006. The impact of unrealised hedge gains and losses was
influential in both periods and EBITDA is an alternative measure of
performance in each period. The company produced an EBITDA of $2.8 million in
the second quarter, down from $4.9 million in the same quarter of 2006. On a
year to date basis EBITDA of $8.2 million was generated in 2007 compared with
$9.3 million in 2006.
    This is a result of the reduced mill feed grades at the Macraes
processing plant resulting from the necessity of processing lower grade
stockpiles whilst the Frasers 4 stripping program is undertaken to expose
higher grade ore that will be mined in later periods

    DISCUSSION OF CASH FLOWS

    Operating Activities
    --------------------
    Cash inflows from operating activities were lower in the second quarter
of 2007 compared to the second quarter of 2006 as a result of reduced gold
sales revenue and the consequential reduction in EBITDA, together with an
increase in net interest payments associated with the higher debt levels.
    Cash inflows from operating activities were higher in the first half of
2007 compared to the second quarter of 2006 primarily as a result of a
reduction in working capital balances partially offset by an increase in debt
interest payments.

    Financing Activities
    --------------------
    Cash inflows from financing activities in the quarter generated a net
inflow of $3.3 million (Second Quarter 2006: $1.3 million outflow).
    This was principally as a result of a net inflow of $5.0 million from
finance lease facilities and was primarily used for the acquisition of mobile
mining equipment. In addition there was a $0.3 million cash inflow related to
the issuance of shares in relation to the exercise of executive share options
and $2.0 million outflow related to the payment of transaction costs incurred
in relation to the equity raising completed in July 2007.
    Cash inflows from financing activities in the half year ending June 30,
2007 was $50.6 million compared to a cash outflow of $2.8 million in the
equivalent period of 2006 primarily due to a net inflow of $10.5 million from
finance lease facilities, $18.7 million from drawings from the NZD project
debt facility and from the issuance of an additional A$30 million of
convertible notes to a nominee of Goldman Sachs (Asia) Finance. These notes
were issued were issued on March 22, 2007, with a coupon rate of 7%, and
mature on March 22, 2014.

    Investing Activities
    --------------------
    Cash flows used in investing activities in the second quarter were
principally for the construction and development of the Globe Progress mine at
Reefton and the Fraser's underground mine and totalled $14.1 million.
    Expenditure of $12.3 million was incurred in pre-stripping and sustaining
activities and $5 million was spent upgrading and adding to the mining fleet.
Expenditure was also incurred on the Didipio Gold and Copper Project.
    Expenditure in the half year ended June 30, 2007 totalled $72.6 million.
This was incurred for the development of the Globe Progress and Frasers
Underground mines, the development of the Didipio Gold and Copper Project,
pre- stripping and sustaining activities at the Macreas open cut mine and the
expansion of the mining fleet.

    DISCUSSION OF FINANCIAL POSITION AND LIQUIDITY

    Company's funding and capital requirements

    The Company expects to continue to fund its planned growth and
development through a combination of the cash balance as at June 30, 2007 of
$71.4 million, cash flow from operations (including sales through derivative
instruments), from various financing facilities, from the exercise of listed
share options, or from the capital markets.
    Current financing facilities available to the group include finance lease
facilities of NZ$83.5 million of which NZ$78.0 million has been drawn and a
fully drawn NZ$41 million project debt facility. In addition a consortium of
banks provides a 350,750 ounce hedging facility, secured by a pledge of the
assets of OceanaGold NZ Ltd.
    The Company's principal requirements for cash over the next twelve months
will be for capital expenditures at its two major projects, being the
development of the Frasers Underground mine at Macraes, NZ and the development
of the Didipio Gold and Copper Project in the Philippines.

    Capital commitments

    OceanaGold's capital commitments as at June 30, 2007 are as follows:

    
    -------------------------------------------------------------------------
                                                   Payments due by period
                                                     as at June 30, 2007
    -------------------------------------------------------------------------
                                                  $'000     $'000      $'000
                                                            (less
                                                             than)
                                                  Total    1 year  1-5 years
    -------------------------------------------------------------------------
    Capital commitments                          18,631     7,542     11,089
    -------------------------------------------------------------------------
    

    Financial position

    Total Current Assets
    --------------------
    There has not been any significant change in total current assets since
December 2006. The cash balance has reduced $8.6m in the period due to
significant capital expenditure in the period offset by cash inflows from
financing activities, and the current portion of future tax assets has
declined primarily as a result of the reduction in the NZ company tax rate and
revaluations of gold derivatives.
    These reductions have been offset by increases in current inventories,
prepayments and a reclassification of derivative assets associated with the
gold put options.

    Total Non Current Assets
    ------------------------
    The increase of $95.8 million was driven by increased Property, Plant &
Equipment and Mining Asset balances resulting from the mine development
activities at the Globe Progress, Frasers Underground and Didipio Gold and
Copper projects and the pre-stripping and sustaining capital activities at the
Macraes open cut mine. In addition the appreciation in the New Zealand dollar
has generated material foreign currency translation differences related to New
Zealand based Property, Plant and Equipment and Mining Assets.
    A $10.2m reduction in derivative assets associated with the
reclassification of gold put options partially offset these increases.

    Total Current Liabilities
    -------------------------

    The decrease of $13.3 million in the six months to June 30, 2007 was
driven by the reduction in unrealised hedge liability balances related to the
gold forward sales contracts and the gold call options due to the reduction in
the market price of gold and the settlement of a number of these contracts.

    Total Non Current Liabilities
    -----------------------------

    The increase of $65.7 million in the first six months of 2007 was due to
the issuing of the additional A$30 million in convertibles notes in March, and
further draw downs of the project debt and finance lease facilities.
    These financing activities have been discussed in more detail in the
analysis of cash flows above.

    Current and non-current derivative liabilities
    ----------------------------------------------

    OceanaGold has in place some derivative instruments used to manage the
risk of adverse movements in gold prices and foreign exchange rates.
    Primary instruments are undesignated forward gold sales contracts for
over 350,750 ounces (2006: 374,037 ounces), gold put options over
281,151 ounces (2006: 320,769 ounces) with an average exercise price of
NZ$1,000 and gold call options over 104,024 ounces (2006: 104,024 ounce) of
forecast 2010 production with an average exercise price of NZ$1,062

    
    A summary of OceanaGold's derivatives is set out below:

                                               June 30 2007 December 31 2006
                                                      $'000            $'000

    Current Assets
    Gold put options                                 17,954            4,298
                                              -------------------------------
    Non Current Assets
    Gold put options                                      -           10,170
                                              -------------------------------
    Current Liabilities
    Gold forward sales contracts                     45,046           63,374
    Gold call options                                 6,650           10,322
    Forward currency contracts                          890              282
                                              -------------------------------
                                                     52,586           73,978
                                              -------------------------------

    Shareholders' Equity
    --------------------

    A summary of OceanaGold's changes in shareholders' equity is set out
below:

                                                             Half Year ended
                                                                June 30 2007
                                                                       $'000
                                                            -----------------
    Total equity at beginning of financial period                    289,160
                                                            -----------------
    Profit/(loss) after income tax                                     5,854
    Other movements in retained earnings                                 479
    Movement in other comprehensive income                            35,510
    Equity portion of convertible debt                                 3,073
    Movement in contributed surplus                                     (170)
    Exercise of options                                                  543
                                                            -----------------
    Total equity at end of financial period                          334,449
                                                            -----------------
    

    Shareholders' equity has increased to $334.4 million as at June 30, 2007
primarily as a result of the profit incurred in the six months and the
movement in other comprehensive income driven by a reduction in deferred
unrealised hedge losses and currency translation differences.
    The other significant movement is the increase in the equity portion of
convertible debt associated with the issue of an additional A$30 million in
convertibles notes in March 2007.

    CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING POLICIES

    The accounting policies that involve significant management judgement and
estimates are discussed in this section. For a complete list of the
significant accounting policies, reference should be made to note 1 of the
2006 audited consolidated financial statements.

    Exploration and Evaluation Expenditure

    Exploration and evaluation expenditure is stated at cost and is
accumulated in respect of each identifiable area of interest.
    Such costs are only carried forward to the extent that they are expected
to be recouped through the successful development of the area of interest (or
alternatively by its sale), or where activities in the area have not yet
reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable resources, and active work is
continuing.
    Accumulated costs in relation to an abandoned area are written off to the
Statement of Earnings in the period in which the decision to abandon the area
is made.
    A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area
of interest.

    Mining Properties in Production or Under Development

    Expenditure relating to mining properties in production (including
exploration, evaluation and development expenditure) are accumulated and
brought to account at cost less accumulated amortisation in respect of each
identifiable area of interest. Amortisation of capitalised costs, including
the estimated future capital costs over the life of the area of interest, is
provided on the production output basis, proportional to the depletion of the
mineral resource of each area of interest expected to be ultimately
economically recoverable.
    A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area
of interest. Should the carrying value of expenditure not yet amortised exceed
its estimated recoverable amount, the excess is written off to the Statement
of Earnings.

    Asset Retirement Obligations

    OceanaGold recognises the fair value of a future asset retirement
obligation as a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets that results from
the acquisition, construction, development and/or normal use of the assets.
OceanaGold concurrently recognises a corresponding increase in the carrying
amount of the related long-lived asset that is depreciated over the life of
the asset. The key assumptions on which the fair value of the asset retirement
obligations are based include the estimated future cash flow, the timing of
those cash flows and the credit-adjusted risk-free rate or rates on which the
estimated cash flows have been discounted. Subsequent to the initial
measurement the liability is accreted over time through periodic charges to
earnings. The amount of the liability if subject to re-measurement at each
reporting period if there has been a change to certain of the key assumptions.

    Asset Impairment Evaluations

    The carrying values of exploration, evaluation, development costs and
plant and equipment are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. If any such
indication exists and where the carrying value exceeds the undiscounted future
cash flows from these assets, the assets are written down to the discounted
value of the future cash flows based on OceanaGold's average cost of
borrowing.

    Stock Option Pricing Model

    Stock options granted to employees or external parties are recognized at
fair value as an expense in equal instalments over the vesting period and
credited to the contributed surplus account. The expense is determined using
an option pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the non-tradable nature of the option,
the current price and expected volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the
option.

    ESTIMATES, RISKS AND UNCERTAINTIES

    The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and related notes.
Significant areas where management's judgment is applied include ore reserve
and resource determinations, exploration and evaluation assets, mine
development costs, plant and equipment lives, contingent liabilities, current
tax provisions and future tax balances and asset retirement obligations.
Actual results may differ from those estimates.
    In addition, this document contains some forward looking statements that
involve risks, uncertainties and other factors that could cause actual
results, performance, prospects and opportunities to differ materially from
those expressed or implied by those forward looking statements. Factors that
could cause actual results or events to differ materially from current
expectations include, among other things: volatility and sensitivity to market
prices for gold; replacement of reserves; procurement of required capital
equipment and operating parts and supplies; equipment failures; unexpected
geological conditions; political risks arising from operating in certain
developing countries; inability to enforce legal rights; defects in title;
imprecision in reserve estimates; success of future exploration and
development initiatives; operating performance of current operations;
environmental and safety risks; seismic activity, weather and other natural
phenomena; failure to obtain necessary permits and approvals from government
authorities; changes in government regulations and policies including tax and
trade laws and policies; ability to maintain and further improve labour
relations and other development and operating risks.

    FOREIGN CURRENCY TRANSLATION

    The unaudited quarterly consolidated financial statements are expressed
in United States dollars ("US$") and have been translated to US$ using the
current rate method described below.
    OceanaGold employs the current rate method of translation for its self-
sustaining operations. Under this method, all assets and liabilities are
translated at the year-end rates and all revenue and expense items are
translated at the average monthly exchange rates for recognition in income.
Differences arising from these foreign currency translations are recorded in
shareholders' equity as a cumulative translation adjustment until they are
realized by a reduction in the net investment.
    OceanaGold employs the temporal method of translation for its integrated
operations. Under this method, monetary assets and liabilities are translated
at the year-end rates and all other assets and liabilities are translated at
applicable historical exchange rates. Revenue and expense items are translated
at the rate of exchange in effect at the date the transactions are recognized
in income, with the exception of amortization which is translated at the
historical rate for the associated asset. Realized exchange gains and losses
and currency translation adjustments are included in income.

    CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION

    Effective January 1 2007, the Company adopted, on a prospective basis,
the new recommendations of the Canadian Institute of Chartered Accountants
with respect to stripping charges, EIC 160 Stripping Costs Incurred in the
Production Phase of a Mining Operation. The new recommendations require the
costs associated with the removal of overburden and other mine waste materials
that are incurred in the production phase of mining operations to be included
in the costs of inventory produced in the period in which they are incurred,
except when the charges represent a betterment to the mineral property.
Charges represent a betterment to the mineral property when the stripping
activity provides access to reserves that will be produced in future periods
that would not have been accessible without the stripping activity. When
charges are deferred in relation to a betterment, the charges are amortized
over the reserve accessed by the stripping activity using the units of
production method.
    As at 30 June 2007 the balance of the deferred stripping costs was
$263,000
    In addition, the Company has changed its accounting policy in respect of
costs associated with the removal of overburden and other mine waste materials
that are incurred prior to the beginning of the production phase of mining
operations. These costs are capitalized as mining assets and are amortized
over the reserve accessed by the stripping activity using the units of
production method.
    As at 30 June 2007 the balance of capitalized pre production stripping
costs was $21,952,000
    These policies have been applied prospectively and prior years' financial
statements have not been restated.

    NON-GAAP MEASURES

    Throughout this document, we have provided measures prepared according to
Canadian generally accepted accounting principles ("GAAP"), as well as some
non-GAAP performance measures. Because non-GAAP performance measures do not
have any standardized meaning prescribed by GAAP, they are unlikely to be
comparable to similar measures presented by other companies.
    We provide these non-GAAP measures as they are used by some investors to
evaluate OceanaGold's performance. Accordingly, such non-GAAP measures are
intended to provide additional information and should not be considered in
isolation, or a substitute for measures of performance in accordance with
GAAP.







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