OceanaGold Total Gold Resources Rise to Record 7 Million oz

Gold mining company OceanaGold's total gold resources have increased by 14% to 7 million ounces of gold, the highest level in its 15 year operating history.

OceanaGold says, in its report for the year to 31 December 2005, that the rise in gold resources over the previous year was due to additional mineralisation discovered at the Frasers underground prospect, Macraes, and the Globe Progress mine at Reefton.

The seven million oz resource includes a proven and probable ore reserve of 2.3 million oz. This was reduced from the 2004 figure by ore production from the Frasers open pit and the redesign of the planned Frasers underground mine to a more selective mining method.

OceanaGold says its reserves at the end of 2005 consisted of: Frasers open pit, over 1.3 million oz; Frasers underground, 322,000 oz; and Globe Progress, 548,000 oz.

The company expects to further increase reserves at Frasers once drilling is reactivated on the underground development. Resources are also expected to increase during 2006 in conjunction with the Macraes and Reefton regional exploration programmes.

In November, the Macraes mine produced its 2 millionth ounce of gold after 15 consecutive years of operations.

Drilling on the Frasers underground panel 2 discovered a high-grade extension that added 392,000 oz of resource and is still open at depth. In-fill diamond drilling confirmed the down-dip continuity and higher grade mineralisation to at least 300 m beyond the currently planned development area.

Future in-fill and extension drilling will be conducted from the underground development to elevate this panel 2 extension mineralisation to reserve status.

Reconnaissance drill testing of other potential underground targets along the mineralised structure at Macraes will be continued during 2006.

A mining tender contract for the initial development and trial mining of the Frasers underground project has been finalised and released to prospective bidders. Evaluation of bids was expected in the first quarter of 2006, with the successful bidder announced shortly after.

Mobilisation and commencement of development work using the underground mining fleet owned by OceanaGold is expected to begin by April 2006. The Frasers underground project is planned for commissioning by the end of 2007.

OceanaGold produced 170,019 oz of gold, all from the Macraes mine, (at a cash cost of A$378 oz) down from the 2004 year output of 184,541 oz (at A$348 oz).

The company's net profit after tax was A$13.9 million from revenues of A$112.2 million following earnings before interest, depreciation, amortisation, tax, and write downs/backs (EBITDA) of A$31.0 million.

OceanaGold's average gold price received during 2005 was NZ$709 (A$661) an oz. This average realised price was a NZ$76 premium over the average NZ dollar spot price for 2005.

OceanaGold's policy is to hedge up to 80% of gold production in any one year.

At 31 December 2005, OceanaGold had sold forward 480,000 oz, for delivery in the period 2006 to 2008 to underwrite the capital commitments associated with the development of the new mines. The average delivery price of the forward sales is NZ$698 oz.

Given the capital commitment to develop the Globe Progress and Frasers underground mines, no dividend was declared for 2005.

Mining was mainly in the Frasers Stage 3 pit with lower grade areas of ore for the most of the year, though by September grades had returned to expected levels. Plant throughput increased to some of the highest levels ever achieved.

Ore processed through the mill during 2005 totaled 5 million tonnes of sulphide material grading 1.27 grams per tonne with an overall recovery of 83.4%.

During 2005, a number of changes were implemented to improve process plant throughput, including adoption of open circuit SAG mill operation for the Mill 500 circuit and increased water volume for improved cyclone flow and flotation efficiency.

In the pressure oxidation circuit, autoclave availability achieved record levels.

The Macraes gold plant now has the ability to process approximately 5.4 million tonnes a year.