OceanaGold provides update for Reefton mine in New Zealand
27 Jun, 2013, 04:14 ET
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MELBOURNE, June 27, 2013 /CNW/ - OceanaGold Corporation (ASX: OGC, TSX: OGC, NZX: OGC) (the "Company") announced today that the Board of Directors has approved a change in the mine schedule for the Reefton gold mine located in the West Coast region of the South Island of New Zealand. This adjustment to the mine plan defers a final cutback at the Globe Progress pit resulting in a two year reduction in the mine schedule and the mine transitioning into a care and maintenance phase mid-year 2015 pending an improvement in the gold price to extract the remaining resource.
The Company intends to maintain its current access arrangement with the Department of Conservation through to 2019 as planned and will commence rehabilitation of areas not expected to be disturbed in the future. The plant and permanent equipment will be left in place during this period of care and maintenance and the Company will be evaluating other opportunities within the goldfield such as the underground potential of the Globe Progress ore body. Additionally, a technical study is underway on the Blackwater project located approximately 15 kilometres south of the Reefton mine. The progression of this project is unchanged and should the project demonstrate positive economics and receive board approval, development activities could commence as early as 2014/2015.
Although gold production at Reefton will be reduced by some 110,000 ounces for the period 2015-2017, significant cost and risk reductions will be achieved under the revised plan resulting in approximately NZ$40-$45 million (US$32-US$36 million) being reduced from the capital budget over the next two years.
In order to de-risk the next two years of production at Reefton, the Company has entered into a zero cost collar hedging program over the estimated production of 115,650 ounces of gold during that period. This program entails a series of bought gold put options creating a floor of NZ$1,600 (US$1248*) per ounce being established for 115,650 ounces commencing in July 2013 through to June 2015. This was financed through the sale of an equal number of sold gold call options creating a ceiling over the same period with a strike price of NZ$1,787 (US$1394*) per ounce.
* Using USD:NZD of 0.78
The impact of this is that in the event the spot gold price on maturity of the option is less than NZ$1,600 per ounce, the Company will nevertheless effectively receive NZ$1,600 per ounce. Should the spot gold price on maturity of the option fall between NZ$1,600 and NZ$1,787 per ounce the Company will sell the gold at the spot price. Where the spot price of gold is above NZ$1,787 per ounce on maturity of the option, the Company will effectively receive $1,787 per ounce. For reference, yesterday's closing NZ$ gold price was NZ$1575 per ounce. The put floor ensures at minimum that the operation is forecast to remain cash positive including all remaining capital expenditures and rehabilitation costs over the next two years.
Mick Wilkes, Managing Director and CEO commented, "OceanaGold has enjoyed strong support from the local and regional communities as well as the Department of Conservation since gold mining re-commenced at Reefton in 2006. During this time we estimate that approximately NZ$45 million of direct and indirect benefits are derived from the Reefton mine annually for the West Coast region alone. However, mining operations must generate sufficient risk-weighted returns in order to remain sustainable and unfortunately the decline in the gold price over the past two months has eroded much of the profitability at Reefton which has lead to this revised plan. While we are hopeful for an improved gold environment, we have taken the necessary steps to ensure a sustainable and profitable operation at Reefton over the next two years and we will continue to evaluate other opportunities across the goldfield including underground opportunities at the Globe Progress pit and historic Blackwater mine."
OceanaGold Corporation is a significant multinational gold producer with projects located on the South Island of New Zealand and in the Philippines. The Company's assets encompass New Zealand's largest gold mining operation at the Macraes goldfield in Otago which is made up of the Macraes Open Pit and the Frasers Underground mines. Additionally on the west coast of the South Island, the Company operates the Reefton Open Pit mine. The Company's Didipio Mine in northern Luzon, Philippines commenced commercial production on 1 April 2013 and is expected to produce 100,000 ounces of gold and 14,000 tonnes of copper per year on average over an estimated 16 year mine life. OceanaGold expects to produce 285,000 to 325,000 ounces of gold in FY2013 from the New Zealand and Philippine operations combined.
OceanaGold is listed on the Toronto, Australian and New Zealand stock exchanges under the symbol OGC.
Statements in this release may be forward-looking statements or forward-looking information within the meaning of applicable securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be forward-looking statements. Forward-looking statements such as production forecasts are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements. They include, among others, the accuracy of mineral reserve and resource estimates and related assumptions, inherent operating risks and those risk factors identified in the Company's most recent Annual Information Form prepared and filed with securities regulators which is available on SEDAR at www.sedar.com under the Company's name. There are no assurances the Company can fulfil such forward-looking statements and, subject to applicable securities laws, the Company undertakes no obligation to update such statements. Such forward-looking statements are only predictions based on current information available to management as of the date that such predictions are made; actual events or results may differ materially as a result of risks facing the Company, some of which are beyond the Company's control. Accordingly, readers should not place undue reliance on forward-looking statements. The information contained in this release is not investment or financial product advice.
SOURCE: OceanaGold Corporation
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