Oceana Gold plans to expand NZ gold mining despite falling prices

Monday, 4 April 2016

An international miner making a $200 profit from every ounce of New Zealand gold is stepping up exploration, despite falling world gold prices.

Oceana Gold last week told the share market that lower diesel prices and a more favourable exchange rate had led to a 25 per cent drop in production costs over the past year.

The cost of mining at its Macraes mine in Otago fell from $1255 an ounce to $961. The value of the New Zealand dollar against the US dollar had dropped by a similar percentage in the past two years, from a peak of more than 80c to the mid-60s.

NZX-listed Oceana said it was looking at upping production at the Macraes open cast mines, which still contained 4 million ounces of gold, and at another nearby underground mine.

* OceanaGold boosts production forecasts for 2015**

Oceana protected its revenue at Macraes by taking out financial protection, or hedging, against the risk of unfavourable currency movements in 2016 and 2017.

It also took a hedge on 90 per cent of its fuel consumption for those two years, again taking advantage of depressed oil prices.

In March Oceana told share market analysts in Canada, where the company is registered, that over the next two years it also planned to use six exploration permits in the northern Bay of Plenty and the Coromandel.

It had budgeted US$10 million (NZ$14.5m) for exploring drilling of 34 kilometres of new and previously-used mine sites.

The company website said New Zealand operations were also more profitable because it was spending less at its Reefton mine as operations there wound down.

Processing of stockpiled ore finished a month ago and the company was now rehabilitating parts of the old mine site.

Oceana, which employs more than 600 New Zealanders, said that it would drill about 34km at Waihi.