OceanaGold Sets Record Quarterly Output for Macraes Gold Mine

OceanaGold set its highest ever quarterly gold production of 52,021 oz from its Macraes mine in the quarter to March 31.

The company says in its first quarter report that gold output was 28% higher than the 40,485 oz produced in the 2005 first quarter.

Last year Macraes, New Zealand’s largest gold mine, produced 170,000 oz.

Mining in the latest quarter occurred mainly in the higher grade hanging wall area of the North Fraser’s 3 pit. Milled grade for the quarter averaged 1.62 g/t of gold — 46% greater than the 1.11 g/t achieved for the same period in 2005.

Cash costs of production were A$303 per oz (US$223 per oz) compared to A$411 per oz (US$320 per oz) in the same period of 2005.

Record monthly mining movement and mill throughput were achieved during the quarter.

Newer equipment in the mining fleet delivered in late 2005 greatly enhanced efficiencies. A new total movement record of just over 5.1 million tonnes was set in January. For the latest quarter just over 14.2 million tonnes was moved compared to 9.5 million tonnes in the first quarter of 2005.

In March 2006, the mill throughput of 16,786 tonnes exceeded the previous record of 16,532 tonnes established in October of 2005. Cost savings and efficiency gains during the quarter have offset rising energy prices.

OceanaGold said it plans to sell more gold at spot prices and to restructure the existing hedge book.

The current gold hedging position covers approximately 80% of budgeted production from the Macraes surface operation to 2008.

This restructure will result in approximately 55% of production being sold at spot prices to the end of 2010 and the remaining 45% of yearly production delivered into hedge contracts with a significantly higher average delivery price than the current book.

The company said it is expects these changes to be in place by the end of May 2006.

Development has started at the Frasers underground mine with the portal being opened, OceanaGold said.

Byrnecut Mining Pty Ltd has been selected as the contractor to develop the underground mine and Byrnecut has started mobilising crews at site. The first blast on the portal has occurred and recruitment of the local workforce is well underway.

The start point of the underground access ramp has been relocated to a permanent section of the pit. This has circumvented the need to drive a secondary incline back to the surface and is expected to reduce pre-production capital cost of the mine by A$7 million.

All services are now installed at the new portal. Offices and ablution facilities are in place and a new workshop is being built.

Exploration activity at Macraes included construction of a geological model of the hanging wall along the mineralised Hyde-Macraes shear zone to identify additional underground targets.

The Golden Point and Round Hill areas appear to be the most attractive targets and exploration activities will concentrate on these areas in 2006.

Meanwhile a programme of geological mapping to identify and evaluate potential open pit exploration targets was advanced over the southern part of the Macraes exploration permit area.

Source: OceanaGold first quarter report to March 31 2006.