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OceanaGold sees benefit from selling on spot market
3 August 2010 - New Zealand’s largest gold producer OceanaGold Corporation, who now ranks behind Newcrest and Lihir as the third largest fully unhedged Australasian-based gold producer, has benefited substantially in the first three months since closing its hedgebook to sell 100 percent on the gold spot market.
Sources: OceanaGold and Lindsay Clark
OceanaGold’s second quarter report to 30th June 2010 stated that the cash operating margins from its Macraes and Reefton Mines had increased from US$192 per ounce in the first quarter to US$627 per ounce in the second quarter.
This in part, was due to the increase in the average gold price that was received in the first three months since the hedge book was closed on 31st March 2010. The current average gold price of US$1191 an ounce is 66.1% higher than the first quarter price of US$743 an ounce, when 78.4% of the production was delivered out of the money hedge contracts.
Additionally, OceanaGold’s second quarter gold production increased to 67,541 ounces, bringing total half year production to 132,832 ounces. The company said it expects to produce 270,000 – 290,000 ounces of gold in the 2010 financial year.
OceanaGold CEO, Paul Bibby, said the 100 per cent exposure to the spot market strengthened the balance sheet and provided the flexibility to direct investment back into the business, as demonstrated by the recent announcement to increase the exploration budget at OceanaGold’s Reefton Operation.
Last month, OceanaGold said it was raising its Reefton exploration spending by NZ$6.3 million for the 2010/2011 year to focus on new drill programmes that targeted potential underground mining targets.
On 1st July 2010, OceanaGold officially took over as owner-miner of the Frasers Underground Mine at Macraes from Byrnecut Mining, who had been the contractor since underground development commenced in 2006.
At Macraes a 7000 m infill drilling programme at Frasers open cut stage 5 was completed from all easily accessible areas in the active pit.
The Macraes North tenements, which are in the northern reaches of the 28 kilometre Hyde-Macraes line of strike, have undergone an extensive sampling and trenching programme over the past nine months. Assays are being evaluated from this programme and drill targets are expected to be proposed for the spring drilling season.
