No hedging bets: Oceana rides gold wave

Sydney Morning Herald

Monday March 29, 2010

Mathew Murphy

THE nation's fourth largest gold producer, Oceana Gold, has followed the lead of its colleagues Newcrest Mining and Barrack Gold, becoming the latest goldminer to close out its hedge book and enjoy the full benefit of a strong gold price.Following the success of its $C86.3 million ($93 million) capital raising, at a price of $2.18 a share, Oceana will use the proceeds to restructure its gold hedging facility and direct the remaining cash, if any, for working capital requirements.Once completed this week, Oceana will generate about $2 million a week in free cash flow if the gold price remains about $US1100 an ounce - something the company has not experienced since it listed in 2004.It comes after a tough 18 months in which its share price plummeted as low as 16. Speculators had suggested the company may be forced to sell one or both of its New Zealand goldmines to fund a cost blowout at its $US320 million Didipio copper-gold development in the Philippines, which it picked up through its takeover of Climax Mining. Oceana put the project on hold.Oceana's chief operating officer, Mark Cadzow, said the company's ability to claw its way back would provide "an enormous boost" to morale. "From an operations point of view it is a big thing for us because you are looking at getting full value for the product," he said. "Oceana is now in a position to present itself as an unhedged gold producer, and a significant one at that, at a time when gold is pretty strong and people are still looking for a safe haven."Mr Cadzow said Oceana would make a decision on its Philippines adventure "around the middle of the year". He said other companies had expressed interest in a potential joint venture but that talks would not advance until the board had assessed a report on the project.Mr Cadzow said New Zealand's government was looking to open up other parts of the country to mining.Mathew Murphy travelled to New Zealand courtesy of Oceana Gold.

© 2010 Sydney Morning Herald

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