Oceana closes out hedge book Mining

The Age

Monday March 29, 2010

By MATHEW MURPHY

AUSTRALIA'S fourth-largest gold producer, Oceana Gold, has followed Newcrest Mining and Barrack Gold by becoming the latest goldminer to close out its hedge book and enjoy the full upside of a strong gold price.Following the success of its $C86.3 million ($A93 million) capital raising, at $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.Once details are completed this week, Oceana will generate about $2 million cash flow a week if the gold price remains at about $US1100 an ounce ($A1200) €” a position the company has never been in since its listing in 2004. The company would have dreamed of being in such a position 18 months ago when the global financial crisis hit and its share price plummeted to as low as 16.At the time, market speculators had suggested the company might be forced to sell one or both of its New Zealand goldmines to fund a cost blowout to 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 to formulate a strategy to develop it as construction costs skyrocketed.Oceana chief operating officer Mark Cadzow said the company's ability to claw its way out of trouble would provide a boost to morale across the company. "It is a big thing for us because you are looking at getting full value for the product you are putting out," 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."Following completion of an initial review into the Didipio project in December, Mr Cadzow said Oceana would decide on its Philippines adventure by mid-year.Several companies had expressed interest in a potential joint venture but that talks would not advance until the Oceana board had time to assess the report."The expectation is that we will have more to say on that in a few months once we look through the options, discuss them with the board and develop the right strategy for the company on how to extract that value."Mr Cadzow said the political climate in New Zealand for the resources industry had improved significantly since the November 2008 election of John Key's Nationals government.Mr Cadzow said the New Zealand government was looking at opening up parts of the country for the mining industry."We would definitely be interested in taking a look at those (opportunities)," he said.The reporter travelled to New Zealand courtesy of Oceana Gold.

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