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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."
About OceanaGold
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.
Cautionary Statement
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
