Profit helps extend life of Reefton mine a tad

MARTA STEEMAN
Last updated 05:00 01/08/2014

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The life of the Reefton gold mine will be "slightly" extended, OceanaGold says, as it reported a US$56.8 million (NZ$66.7m) profit for the half year, a turnaround from the previous half year's loss.

However, its shares dropped 45 cents, or 11.5 per cent, to open trading this morning at $3.45 on the NZX.

Its main operations are two open-cut goldmines and an underground mine at Macraes in Central Otago and at Reefton on the West Coast, and a gold and copper mine at Didipio in the Philippines.

In the first half of this year, the second-quarter production was lower than the first quarter and OceanaGold said that had been previously signalled.

It said lower production, similar to the second quarter, would continue at Macraes and Reefton for the rest of the year.

The 2014 half-year profit was earned from revenue of US$298m, 31 per cent higher than the previous half's US$227m. The half-year profit included a $2.1m loss in the second quarter.

In the half year, the company produced 147,399 ounces of gold and 11,185 tonnes of copper.

The 2014 half year profit compares with a US$63.4m loss in the 2013 first half caused by the company slashing the value of its assets by US$85.5m. It followed that up in the December 2013 quarter with a further writedown of US$107.8m, forced by the falling price of gold.

OceanaGold said yesterday it had revised the plan for Reefton mine and that would result in a "slight increase in the life of the mine" to the end of next year.

Andrea Atell, communications managers, said it would then be placed in "care and maintenance" with just a core team maintaining it.

OceanaGold announced about a year ago that the mine life for its Central Otago mines would be shortened as well because of the falling price of gold. Macraes' open pit has a life until the end of 2017, cut by two years, and Frasers Underground until mid next year.

OceanaGold said lower production in the second quarter this year had been signalled because of mine sequencing, where lower-grade ore was being mined and processed at Didipio and at the New Zealand operations.

Also, the collapse of a pit wall at Macraes early in the second quarter stopped operations for a few weeks and resulted in a 73 per cent fall in the amount of material mined from Macraes open pit.

In the second half of this year, Macraes would have a reduced rate of mining and the processing of a higher amount of low-grade stockpile to supplement the mill feed.

A new plan at Macraes would bring forward the mining of Coronation pit.

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OceanaGold is sticking with its guidance of lower gold production this year - between 275,000 and 305,000 ounces - and 21,000 to 24,000 tonnes of copper.

Last year's record production was 325,732 ounces of gold.

The international price of gold was about US$1304 an ounce yesterday, down from a peak of about US$1800 in 2012.

- The Press

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