OceanaGold Moves into Higher Grade Ore in Frasers Deposit

OceanaGold began mining higher grade ore at its large Frasers pit at the company's Macraes mine in east Otago, lifting gold production to 48,281 oz in the fourth quarter from 47,524 oz in the same period of 2004.

In its report for the three months to 31 December 2005, Oceanagold says that, as forecasted, mining in the quarter transitioned from the relatively low grade stockwork system into higher grade ore associated with the Macraes shear zone hanging wall.

Mined grades improved each month of the quarter as the proportion of higher grade hanging wall ore increased in the deeper benches of the Frasers Stage 3 Pit. The higher grades are expected to continue until completion of the Stage 3 Pit in the second quarter of 2006.

According to the report, all five new Caterpillar 789C haul trucks were commissioned and operational by the end of October. The extra trucking capacity, combined with the new EX3600 Hitachi digger and shorter hauls in the developing Frasers South Stage 2 Pit, has improved excavator productivity and total movement during the quarter.

During the year, OceanaGold increased the SAG mill speed and circuit pumping capacity to improve mill throughput. Processing throughput for the quarter was 1.3 million tonnes, 2% higher than the fourth quarter of 2004. Further throughput improvement activities and optimisation of ore blending are planned for the first quarter this year, to raise the treatment rate to 5.4 Mtpa.

The average price received per ounce of A$661 was similar to A$667 per ounce received in the fourth quarter 2004. Cash costs were A$347 per oz, 2% lower than the September quarter of 2005.

The report says that since releasing of the NZ$55 million Frasers underground project definitive feasibility study during the fourth quarter, work has been completed on the box cut required for development of access from the Frasers open cut. Design and installation of services, such as power and water to the proposed portal entry, are underway.

A contract mining tender was finalised and released to prospective bidders for the initial development and trial mining of the Frasers underground project. Evaluation of the bidders submissions is expected to be completed by the first quarter of 2006, and a contract award made shortly thereafter.

Mobilisation and commencement of development work utilising the underground mining fleet owned by OceanaGold is expected to commence by April 2006. OceanaGold intends to commission the underground project by the first quarter of 2006.

Exploration in the Frasers underground panel 2 extension area has revealed significant thicknesses of stockwork mineralization in two holes. These results are consistent with the hanging-wall mineralisation thickness and grades previously observed in the extension area and suggest that there may be other pods of potentially economic mineralisation beneath the hanging-wall, the report states.

Assay results were received for the final holes completed at the Panel 1 extension prospect. These indicate that the mineralised structure is narrow, but the area is still considered prospective for a blind ore shoot.

Diamond drilling commenced at the Inkerman prospect in December 2005, testing a mineralised structure 2.5 km south of the Globe Progress deposit. No assay results have been received. A further six holes are planned to test the Inkerman prospect area in the 2006 first quarter, the report says.