Open Briefing(R). OceanaGold. Gold Production Growth

    MELBOURNE, Australia, Nov. 16 /CNW/ -

    Date of lodgement: 16-Nov-2007

    Record of interview:

    OceanaGold Corporation ("OceanaGold" - TSX, ASX and NZX codes "OGC")
    plans significant gold production growth through new projects to add to
    production from its flagship Macraes Gold Mine in New Zealand. Can you
    explain your corporate growth strategy?

    CEO Steve Orr

    Our corporate growth strategy is to use the New Zealand asset base,
    currently the Macraes Gold Mine and the recently commissioned Reefton
    Gold Mine, to continue growing our production profile. We have one
    additional new project commissioning in early 2008; the Frasers
    Underground mine, which is an underground extension to the Macraes gold
    project. Frasers will increase our New Zealand production to 280,000 to
    300,000 ounces per annum and we will use the cash flow from New Zealand
    as a foundation for further growth through acquisition, development and

    We believe that most of the gold projects within the Australasian region
    are undervalued relative to projects elsewhere in the world. So our
    objective is to continue to acquire assets within this region and to
    consolidate and grow our position there. The first step in that strategy
    was the 2006 acquisition of Climax Mining which gave us ownership of the
    Didipio gold-copper project that we are now constructing. It will be
    commissioned in the first half of 2009. At that point, our production
    will move to 350,000 to 370,000 ounces plus 15,000 to 20,000 tonnes of
    copper per annum by 2010.

    What impact will Didipio, Frasers Underground and Reefton have on your
    company-wide production, operating costs and operating cash flow?

    CEO Steve Orr

    In calendar 2007 we'll probably produce between 170,000 and
    180,000 ounces of gold and in 2008, with three projects operating in
    New Zealand, we expect 280,000 to 300,000 ounces. We'll start
    commissioning Didipio in the first half of 2009 and in that year our
    production will increase to 320,000 to 340,000 ounces. In addition, we'll
    begin producing copper for the first time and by 2010 we'll be producing
    350,000 to 370,000 ounces of gold per annum and 15,000 to 20,000 tonnes
    of copper per annum.

    Copper production will have a significant beneficial impact on our cash
    costs. In 2007 our cash costs are anticipated to be about US$575/oz of
    gold although this is a bit of an anomaly because this year is a
    redevelopment year for Macraes and we've been processing a significant
    amount of low-grade stockpile material, resulting in exceptionally high
    cash costs. In 2008 when all three of our New Zealand projects have been
    commissioned, we anticipate cash costs will be around US$320 to 340/oz,
    and by 2009 when Didipio is ramping up, we expect that to fall
    dramatically to around US$215 to 235/oz due to the copper by-product
    credit and the high-grade nature of the Didipio gold deposit. By 2010,
    once Didipio is operating at design capacity, we expect cash costs to
    drop to US$175 to 195/oz.

    By 2011, we expect to generate between US$90 and $100 million in free
    cash flow based on a gold price of $500/oz and copper price of $1.90/lb.

    Earlier this year, OceanaGold raised over C$100 million to complete the
    financing of Didipio. What progress have you made recently on the
    construction of the project? Is it on track for time and cost budget? How
    important is this project for OceanaGold's growth?

    CEO Steve Orr

    Didipio is very important to our growth profile. When Didipio is
    operating at full run rate, it's going to be making about 50% of the
    gold-equivalent contribution to the Company.

    We are on schedule with our development timeline for Didipio. We recently
    completed an upgrade to the access road to all-weather status. This now
    allows us to get in large mining equipment and large infrastructure
    components to construct the plant during 2008. We also have awarded our
    engineering, procurement, construction and management (EPCM) contract to
    Ausenco Limited. Their EPCM team is on site now and we are starting work
    on the camp construction. We will be constructing the process facility
    and doing the pre-strip for the open pit in 2008 before starting the
    commissioning phase in early 2009.

    The capital cost is expected to be about US$155 million although we are
    still to complete the final engineering at which point we'll be able to
    lock down definitive bids from suppliers. We don't expect there to be a
    dramatic change in that total capex number.

    How successful has the corporate restructure to a Canadian corporation
    with a Canadian TSX listing been? Is it meeting objectives? What change
    in your share register has occurred or do you expect?

    CEO Steve Orr

    The restructure to a Canadian corporation allowed us to obtain a full
    board listing on the TSX which was quite important to us. Although we
    view our listing on the ASX as equally important, the TSX listing has
    given us broader international exposure to capital markets as the Company
    continues to grow. It takes some time to build our shareholder base and
    it also takes time to build liquidity. However, we're very happy with
    progress to date as there is about a third of our trading volume on the
    TSX even though we've only been trading there since end June.

    We think we have a great growth story, and we think the Company is
    immensely undervalued and, at this point, we are not that well known
    internationally. However, as we continue delivering quality development
    projects and growing the Company, we think we'll be recognised as one of
    the best international growth stories in the gold sector. The TSX listing
    has been successful because it's starting to give us that exposure.

    As you would imagine, our share register has diversified internationally.
    We have about 30%-35% of our shares in Australia, 12%-15% in Asia,
    12%-15% in Europe and 30%-35% in North America.

    OceanaGold released its report for the quarter ended 30 September 2007.
    Despite an increase in average gold price received, why did EBITDA
    decrease on the pcp?

    CEO Steve Orr

    This was essentially due to the Macraes redevelopment this year. Our
    guidance to the market was that it was going to be a high-cost, low
    production year for our core Macraes operation. This was because we were
    conducting significant overburden removal to access the last remaining
    deep ore block within the mine.

    With our mining equipment deployed in the waste overburden removal, we
    processed a significant quantity of low grade stockpile running 0.6 to
    0.7g/t compared with the normal ore we would feed the plant of 1.1 to
    1.2g/t. The net result was that our cash cost per ounce has been much
    higher in 2007. The slower ramp up than anticipated for Reefton project
    contributed to this as well. Reefton, however, has now reached planned
    production levels.

    The other contributor was the unrealized loss from the out-of-money
    position on the hedge book. This is effectively a function of the
    movements in the spot gold price and has no effect on cash revenue that
    we generated in the period.

    Can you also comment in more detail on the rise in cash operating cost
    and non-cash cost and the lower recoveries?

    CEO Steve Orr

    The cash cost increase this year, which we now anticipate will be in the
    range of about US$575/oz, is due to the low production and will decrease
    dramatically next year. In fact, we've completed the overburden removal
    campaign and in the December 2007 quarter we're expecting to see lower
    cash costs as a result of producing reserve grade ore out of the mine. We
    have returned to normal rates of gold production.

    The non-cash costs were a result of our compliance with Canadian GAAP.
    The methodology that's accepted for dealing with waste overburden removal
    is different than IFRS methodology, under which we previously reported.
    Under Canadian GAAP, we are required to expense all waste stripping
    associated with the ongoing ore removal, in particular blocks of ore.
    However, the waste overburden removal associated with future production
    is capitalised. As a result, our non-cash cost has increased.

    What are the individual project parameters for the new projects such as
    gold production, operating costs and capital expenditure? What is the
    outlook for the Macraes operation including Frasers Underground?

    CEO Steve Orr

    The Macraes Project including Frasers will be producing about 200,000 to
    225,000 ounces per annum starting next year. Then, the residual 60,000 to
    100,000 ounces will be coming from our Reefton operation.

    Any further production increases out of New Zealand are constrained by
    the capacity of our pressure oxidation facility. We would only expand the
    Macraes pressure oxidation facility if we find a new significant

    We will probably maintain New Zealand production at or about
    300,000 ounces per annum. This goes back to the strategy of using
    New Zealand as a production foundation so that we can develop or acquire
    additional projects in other parts of Australasia.

    The remaining capital expenditure will be for the construction of the
    Didipio project. We have spent US$14 million at Didipio so far. We will
    have spent more than US$225 million at Didipio, Reefton, and at Frasers
    by the end of 2009. We will then start generating positive cash flow, and
    by 2011, we expect to generate between US$90 and $100 million in free
    cash flow per annum.

    What are the main technical challenges at each project? Are there any
    particular mining or metallurgical issues of note? Is water, power or
    labour an issue at any project?

    CEO Steve Orr

    The metallurgy of our ore bodies in New Zealand is quite complicated. The
    Macraes, Frasers ore bodies are refractory and contain carbonaceous
    material. We have an autoclave, or pressure oxidation facility, at
    Macraes which effectively processes these ores and allows us to maximise
    gold recoveries.

    It turns out that our Reefton deposit is refractory as well and it's one
    of the reasons we float a gold concentrate at Reefton and then rail it to
    Macraes to process it through the autoclave. Our autoclave facility deals
    very effectively with that degree of metallurgical complexity, and we
    have one of only three such facilities in Australasia. So, it's a very
    valuable asset and it will allow us to economically process additional
    ore bodies we might discover or acquire in the region.

    In the Philippines, the Didipio ore body is relatively uncomplicated.
    It's a simple, free milling deposit requiring conventional crushing,
    grinding and flotation to produce a gold and copper concentrate for third
    party smelting.

    New Zealand's power is generated by hydro projects in the South Island
    and the power costs are very reasonable, and the average power cost is
    only about NZ$6.7c per kilowatt hour. To further de-risk Didipio, we are
    examining options for a heavy fuel oil power facility at the site to give
    us secure supply. The additional capital required to build this would
    likely come by way of a finance lease from the equipment manufacturer.

    In comparison to places like Western Australia labour has not been as
    much of an issue for us in New Zealand or the Philippines. In New
    Zealand, we seem to be able to attract quality labour because it's a
    great place to live. In the Philippines we are creating an economy in a
    very remote area, but we've already been successful in attracting a large
    number of Filipinos back to the country. There's a great mining culture
    in the Philippines with thousands of skilled Filipino miners working
    throughout the world.

    The 2 millionth ounce of gold was recently poured at Macraes. What near
    mine site exploration programs do you plan there, or at your other
    projects? What are the most prospective areas? What is the quality of
    additional ounces typically found near existing projects?

    CEO Steve Orr

    We're focusing our exploration in New Zealand in two areas. We
    essentially control the entire Macraes gold fields and so far it has
    produced 2.5 million ounces and still has another 3.5 million in
    resource. Therefore, we believe there's significant upside potential.
    However, that upside potential mostly exists in deep extensions of the
    Macraes deposit. We have been successful in discovering the deep
    extensions of the current open pit and also the deep extensions of one of
    the early pits developed around 1990. So, we're quite optimistic about
    our ability to continue discovering more reserves at depth.

    Our second area of exploration focus is the Reefton district. Through our
    new Reefton mine we have essentially reactivated that gold district and
    we control the entire 32 kilometre mineralised trend there. We're now
    conducting exploration both to the north and south and it's an immensely
    prospective area. We aim to discover more open cut reserves for
    processing in the one million tonne per annum crushing, grinding and
    flotation plant and ship it back to Macraes for pressure oxidation and
    gold recovery. We believe we will be quite successful adding reserves at
    Reefton and will be able to mine in the district for many years.

    What about regional or greenfield exploration programs, particularly in
    the Philippines? Do you plan new tenement acquisitions, particularly in
    the future with the cash flow generated from the growth projects? Do you
    expect to broaden your operating focus beyond New Zealand and

    CEO Steve Orr

    One of the benefits of the merger with Climax Mining - other than the
    Didipio Project - was it gave us control over six very prospective
    exploration projects throughout the Philippines extending from the
    northern end of Luzon Island to the northern end of the Surigao Peninsula
    in the southern part of the Philippines. These projects are all
    large-scale copper and gold prospects with the ability to generate a
    "company-maker" deposit.

    We're budgeting US$5 million in 2008 to begin exploration on these
    projects. The first two we'll be testing are Manhulayan in the northern
    Surigao Peninsula and Papaya within our mining permit area close to
    Didipio. We expect to start drilling Papaya by the end of next year and
    Manhulayan in early 2008.

    We are very keen to grow the Company beyond New Zealand and the
    Philippines with a focus within Australasia and we continue to assess a
    number of opportunities within that part of the world.

    Why has the Philippines become a major area of focus for the Company?
    What are the major fiscal terms for Didipio? Can you describe the
    political and social climate there?

    CEO Steve Orr

    The Philippines is a major area of focus for us because of its
    prospectivity, and it's been significantly underdeveloped in terms of
    mining. In addition, the Philippine Government has made significant
    improvements to attract foreign investment in the mining industry over
    the past 10 years.

    Importantly, we are the first project that will be constructed under the
    current mining legislation, so it is an opportunity to generate
    significant value for our shareholders. From what we've seen, we are
    immensely confident in our ability to get this project constructed and

    The major fiscal terms for Didipio are embedded in a fiscal stability
    agreement called a Financial and Technical Assistance Agreement (FTAA).
    Basically, the FTAA provides a five year tax holiday, and the ability to
    fully depreciate all accumulated capital expenditures up to the first
    seven years.

    We have an excellent relationship with the federal, regional and local
    government in the Philippines and there is strong support for the Didipio
    project. The federal government has made responsible development of a
    sustainable mineral industry a key objective. The fiscal stability
    provisions under the FTAA have made foreign investment quite attractive.

    What is your current funding situation? In addition to Didipio, where
    broadly will you spend the cash?

    CEO Steve Orr

    We hold US$140 million in cash, and we'll be spending all of that on
    constructing and commissioning Didipio. By the end of 2008 or early 2009,
    we will have spent more than US$200 million constructing and
    commissioning our projects.

    Beyond that, we're continuing to look at growth opportunities. If we can
    find a value accretive transaction, we will probably be using our equity
    to do that.

    Thank you Steve.

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For further information:

For further information: about OceanaGold, please visit or contact Darren Klinck, Vice President, Corporate &
Investor Relations, OceanaGold Corporation, telephone + 61 3 9656 5300

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