Open Briefing(R). OceanaGold. Progress on Expanding Production


    MELBOURNE, Australia, Jan. 31 /CNW/ -

    Date of lodgement: 31-Jan-2008

    Record of interview:

    OceanaGold Corporation ("OceanaGold" - TSX, ASX and NZX codes "OGC")
    produced 63,505 ounces of gold in the December quarter 2007 which was a
    significant increase over the September quarter of 43,194 ounces. Can you
    comment on these increased production rates and the fact that cash costs
    for the year while high at US$556/oz, came in under guidance of US$570-
    $580 per ounce?

    CEO Steve Orr

    We had anticipated and planned for a particularly strong December
    quarter. We had also expected the first three quarters to be challenging
    due to our significant waste removal program at the Macraes open pit,
    however this was completed on time as forecast by the end of the
    September quarter when we resumed mining ore-grade material in the pit.
    In addition, we significantly improved our performance at our new Reefton

    As a result, concentrate production increased at Reefton and much higher
    grades went through the plant at Macraes resulting in higher production
    and dramatically reduced cash costs per ounce for the quarter.

    Planned production rates were recently met at your Reefton operation and
    the Frasers Underground mine was successfully commissioned this month.
    Can you outline your Company-wide production and cash cost expectations
    for 2008 in light of the initial operating performance of these new
    mines? How does the NZ$ exchange rate influence these costs?

    CEO Steve Orr

    OceanaGold's production for 2008 will, for the first time in the
    Company's history, come from multiple mines. We now have three operating
    mines in New Zealand. In 2008, we expect to produce between 280,000 to
    300,000 ounces of gold at a cash cost of US$440 to US$460 an ounce.

    This cash cost guidance is higher than our guidance provided mid-year in
    the prospectus with our TSX listing despite our cash costs in NZ$ terms
    remaining virtually unchanged over that time. Our US$ cash cost forecasts
    have increased because the NZ$ has appreciated from US$0.68 in early 2007
    to approximately US$0.78 now.

    Offsetting this is the gold price which is up by about US$300/oz from
    January 2007. That has resulted in much higher margins and significantly
    higher cash flow. To take advantage of the strong gold price, we've
    recently announced that we've rolled our hedge position in 2008 into
    2011, which leaves us entirely unhedged this year. That will
    significantly improve our cash flow in 2008.

    You have previously described 2007 as a transition year for your major
    New Zealand operation, Macraes Gold Mine, with the processing of low-
    grade stockpile resulting in exceptionally high cash costs. Are you
    through that transition period? How do you expect Macraes to improve in
    terms of production and cash costs? The average grade through the mill at
    Macraes for the December quarter was 1.43 g/t, substantially higher than
    the earlier quarters of 2007. What grades do you expect in 2008 and what
    are the key drivers to attaining this?

    CEO Steve Orr

    Yes, we are through the transition period. The performance in the
    December 2007 quarter demonstrated what we expect to see from our
    operations in 2008. For instance, the mill grade at Macraes in the
    December quarter increased 56% over the September quarter because we're
    now processing mine grade ore versus low grade stockpiles.

    We expect similar mill grades in 2008 - in the range of 1.3 to 1.4g/t.
    The December quarter was a great example of the leverage that we can get
    in New Zealand from improved ore grades. We produced 19,305 ounces in
    December alone, which is the highest on record and our cash costs were a
    very competitive US$372/oz.

    The key drivers for a stronger operating performance in 2008 are: mining
    the recently accessed ore blocks at Macraes; having the Frasers
    Underground fully commissioned; and having the Reefton mine performing to
    expectations. The Frasers Underground and Reefton are particularly
    important as their ore grade is about twice the grade of Macraes open

    Do your longer term production and cash cost targets remain on track once
    your Didipio gold-copper project in the Philippines commissions in 2009?

    CEO Steve Orr

    Yes they do. As a matter of fact, at these buoyant metal prices, our cash
    costs at Didipio could be lower than we had been projecting to the market
    because we have done all our financial forecasting based on a copper
    price of US$1.90/lb. The copper price is currently over US$3/lb. So, with
    a significantly higher copper price, our forecast cash costs after by-
    product credits actually declines. We also based our financial forecasts
    on a gold price of US$500/oz, and the gold price is now well over
    US $900/oz.

    We certainly expect to achieve our cost guidance because it was quite
    conservative relative to metals pricing today.

    OceanaGold's market capitalization is around A$400 million. In a recent
    Open Briefing you stated that by 2011, you expected to generate between
    US$90 million and $100 million in free cash flow based on a gold price of
    US$500/oz and a copper price of US$1.90/lb. What is the sensitivity to
    higher commodity prices given that spot gold is now well over US$900/oz?

    CEO Steve Orr

    In 2010, Didipio's first full year of production, a US$100/oz increase in
    the gold price would generate another US$28 million to the bottom line of
    the Company and a US$1/lb increase in the copper price would generate
    about another US$43 million.

    What challenges or out-performance have you achieved at Reefton so far?
    What are the main challenges in ramping-up Frasers Underground?

    CEO Steve Orr

    The biggest challenge in achieving targeted production rates from Reefton
    are associated with the concentrate filter press. The ore contains fine
    clay and we had initial bottlenecking problems with the filters. We've
    partly addressed this by delivering higher density to the concentrate
    filters so it doesn't have to remove as much water. We are also adding a
    supplementary filter as a backup and we've added additional chemicals to
    the process. Reefton is now achieving projected production rates.

    We've been very happy with the commissioning of Frasers Underground.
    While we announced its full commissioning in early January 2008, Frasers
    has been producing gold intermittently throughout 2007. It produced over
    10,000 ounces in the December quarter.

    OceanaGold has contracted Ausenco Limited for the engineering,
    procurement, construction and management (EPCM) at Didipio. Can you
    update progress? When do you expect to complete the camp construction?
    When do you expect to begin pre-strip and the construction of the process

    CEO Steve Orr

    We're currently doing civil work around the process plant site. We've
    completed the tender analysis for our largest contract which is the pre-
    strip for the open cut and also for the construction of the tailings dam.
    We've notified our preferred contractor and are working through the final
    contract details and will announce the successful bidder in the next few
    weeks. Following this, the contractor should mobilise to site by the
    beginning of the June quarter 2008. Pre-stripping will be completed at
    the beginning of 2009 and will be followed immediately by first ore
    mining. We'll mine the open pit for around 3.5 years and follow that with
    underground mining below the bottom of the pit.

    By mid 2008 we'll start construction on the 2.5 million tonne per annum
    plant which will include crushing, grinding and flotation. We've also
    started early stage negotiations for concentrate off take agreements with
    third parties.

    There has been considerable speculation regarding community support, or
    lack of, for the Didipio project. Can you comment on these reports?

    CEO Steve Orr

    It has been disappointing that our position in the Philippines has been
    misrepresented in some factually incorrect reports. We have extensive
    local community support for the project and we also have both federal and
    regional government support. We've made it a key focus to ensure the
    majority of the community supports the project since acquiring it just
    over a year ago. We've put a great deal of effort into community
    development initiatives such as training and hiring of the local
    community so that we can give them employment preference. Additionally,
    we have started working with local universities and a Philippines based
    NGO to identify sustainable initiatives in a variety of areas that can be
    implemented today that will provide positive impacts in the near and long
    term. These efforts have been an important factor in progressing the

    OceanaGold's share price has fallen from a high of $4.15 mid last year to
    the current approximately $2.60 and a little above its all-time low of
    $2.18. What is your view on the weak share price considering the rapid
    increase in gold price and strong production growth profile out to 2011?

    CEO Steve Orr

    There are a lot of issues that we need to deliver on this year along with
    commissioning of Didipio in 2009. I think the market certainly expressed
    its disappointment with the performance of the New Zealand operations in
    2007 and this was directly reflected in the share price. So there's a bit
    of a "watch and wait" in the share price, but we're confident we can
    deliver and the strong December quarter demonstrates we are well on our
    way to doing that.

    Our share price has certainly been impacted by the misrepresentation and
    inaccuracies regarding support in the Philippines. However, we believe
    the market does realise the very significant value that exists within the
    Didipio deposit and how beneficial its strong cash flow and low cash cost
    will be for OceanaGold's overall profile. We are a bit of an early mover
    there and while that presents challenges it also conveys enormous
    opportunities. The Philippines will be an important part of our business
    for years to come.

    Obviously, 2008 is a crucial year for us. For the first time in the
    Company's history, we will have three operating mines and the market is
    watching to see if we can effectively deliver on our target of 280,000 to
    300,000 ounces in 2008. The market is also watching to see if we can
    effectively deliver on the construction and the commissioning of Didipio
    by 2009. We are certainly on track with both and are happy with our

    Can you outline the current exploration programs - at depth at Macraes,
    in the Reefton Goldfield and in Philippines? Where do initial results
    indicate you might have success?

    CEO Steve Orr

    In the Macraes gold field, we are focusing on generating more underground
    reserves. After we discovered the two underground panels under the
    Macraes open pit, we started drilling under some of the open pits that
    were mined when Macraes was commissioned at the beginning of the 1990s
    and it looks like we have another underground panel emerging under the
    very first pit drilled. So, we're quite optimistic about our ability to
    generate multiple underground panels from the 7 legacy pits that have
    been mined in the Macraes gold field over the last 17 years.

    At Reefton we've actually been very successful in converting resource to
    reserve, both through infill drilling - which demonstrates continuity in
    the mineralisation between the four, currently distinct pits - and
    secondly through an increase in the gold price.

    Beyond that, we're conducting broader regional exploration drilling
    throughout the Reefton goldfield. Right now we're drilling just to the
    north at Crushington where it appears another surface resource is

    In the Philippines, our focus for 2008 will be on a greenfields project
    called Manhulayan, quite a way south of Didipio, on the Northern Surigao
    Peninsula. It has a very strong surface expression of a copper/gold
    porphyry. We're currently mapping it and doing some surface sampling and
    we expect to begin drilling around April 2008. Also, a number of the
    near-mine targets at Didipio will be drilled this year as we look to
    expand the reserve near Didipio ultimately working some of these into the
    mine plan. Outside of that, our team in the Philippines is working with
    local communities on a number of our exploration tenements to re-
    establish relationships and update permits.

    What other avenues does OceanaGold have to pursue a growth strategy?

    CEO Steve Orr

    The production rate of 280,000 to 300,000 ounces per annum from
    New Zealand will be fixed unless we find a large enough discovery to
    justify expanding the autoclave facility at Macraes. However, we're
    optimistic in our ability to generate additional reserves both in the
    Macraes and Reefton goldfields.

    Upside from new projects exists in the Philippines where we have six
    highly prospective copper/gold porphyry projects all of which have the
    potential to generate ore bodies of the scale of Didipio.

    In addition, we're looking at other opportunities throughout Australasia
    to acquire assets or companies and continue to expand our production and
    our exploration projects.

    Thank you Steve.

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For further information:

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

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