OceanaGold calls time on Reefton mine
Australian gold miner OceanaGold Corporation will stop mining at its Reefton mine on the West Coast in two years.
OceanaGold, under pressure from a falling gold price, announced this morning it would be placing the Globe Progress opencast mine "into a care and maintenance phase mid-2015".
That amounted to a two-year reduction in the mine schedule, managing director Mick Wilkes said.
The plant and equipment would be left in place during the "care and maintenance" and the company would evaluate other opportunities in the gold field such as the potential to mine the ore body underground.
OceanaGold started mining at the Globe Progress site near Reefton in 2006. The new move will reduce risks and costs including up to $45 million of savings in the mine's capital budget, although it will lose the 110,000 ounces of gold production it had expected in the two years 2015-2017, Wilkes said.
The company has put in place hedging arrangements which mean it will receive a minimum NZ$1600 an ounce of gold for 115,650 ounces expected to be produced from July 2013 to June 2015 from Globe Progress.
That would ensure the mine remained cash-positive including all remaining capital expenditures and rehabilitation costs.
Yesterday's closing gold price was NZ$1575.
Wilkes said the company estimated $45m of direct and indirect benefits had come from the Reefton mine each year to the West Coast region.
However the mine had to generate enough returns to remain sustainable and "unfortunately the decline in the gold price over the past two months had eroded much of the profitability at Reefton which has lead to this revised plan."
The OceanaGold share price held steady today at $1.40. The share price has lost 70 per cent of its value since last year's $4.50 peak close in October.
The gold price closed at US$1211 yesterday, 37 per cent down on its peak in August 2011.