Goldminer looks at pay freeze in South Island

Australian goldminer OceanaGold is looking at a wage freeze for several hundred mining staff at its two South Island mines.

The sustained fall in the gold price has triggered the hard look at the operating costs of the Macraes mine in Otago and the Globe Progress near Reefton on the West Coast.

OceanaGold will be also seeking cost savings on other expenditure.

It may reduce the lifespan of the Globe Progress mine.

The company said it had about 800 employees and contractors at the two mines, which are its main mining operations.

In a "Company Insight" report to shareholders yesterday released on the New Zealand stock exchange, OceanaGold said it was reviewing its mine plan at its main New Zealand mine, Macraes in Central Otago and, "more particularly, Reefton in light of the lower gold price".

"We're looking to minimise the amount of capital expenditure, particularly on re-stripping for future production, and we're also looking at wages freezes and reviewing all discretionary expenditure to reduce unit operating costs.

"We will update the market on Reefton within the next six weeks but can expect that the mine schedule will likely reflect a shorter mine life with these new economic realities."

OceanaGold has shareholders in New Zealand, but the main shareholders are in Australia and Canada. It is listed on the sharemarkets of Canada, Australia and New Zealand.

"We will ensure the New Zealand operations remain cashflow positive after sustaining capital expenditure and only spend capital that is absolutely necessary to meet the production plan."

Managing director Mick Wilkes said in the report that no operation would subsidise the cashflow of another. Each mine had to support its spending requirements.

The news on its new gold and copper mine, Didipio in the Philippines, was much more positive. The sale of the byproduct, copper, was more than covering the cost of mining the gold and copper, plus the company was getting the price of the gold.

That extra margin was US$50- $370 per ounce of gold.

OceanaGold head of business development Darren Klinck said the wide range was a result of there being "a lot of moving parts" in mining.

Didipio was a "very robust operation" three months after it was commissioned, Klinck said.

The cost of production was higher at the New Zealand operations.

The big goldminers around the world were reviewing their costs with the fall in the gold price, he said.

Gold prices in the United States yesterday plunged by US$87.80 (NZ$112.50), or 6.4 per cent, to US$1286.20 an ounce after the US Federal Reserve said it was contemplating an end to its bond- buying programme. Traders view gold as insurance against inflation and a weak dollar but that appears less of an issue now.

Gold hit a historical high of about US$1900 in August 2011.

Wilkes said in the report its focus now was to get the most value from Didipio. The plan was to ramp up to 3.5 million tonnes of ore throughput a year by the end of next year, meaning it should average 3Mtpa by 2014 and 3.5Mtpa in 2015.

Even with the lower cash price the company was poised to generate good free-operating cashflow.

As well, it would be reviewing its dividend policy next year.

Klinck said there had been no dividends to shareholders in the past few years while free cashflow went to developing Didipio but the company would be examining next year ways to return capital to shareholders.

The report also said OceanaGold saw itself operating three or four mines in various countries within five years.

The Press