Miners plan to repair and regenerate

OceanaGold Reefton mine will be turned into a lake and the surrounding forest regenerated, once the mine is no longer productive. Photo / Grant Bradley

OceanaGold freely admits open-cast mining is not a pretty business.

In Otago the company has blasted, gouged and tunnelled its way through schist to move over half a billion tonnes of the countryside.

This redistribution has all taken place within the size of a small farm yet produced over $4.5 billion worth of gold in today's dollars and turned the company into Australasia's fourth biggest gold producer.

On the West Coast near Reefton, the company has carved out a valley in a DoC forest park, dug a pit more than 150m deep into the valley floor and since its commissioning in 2007 has extracted 80,000 ounces of gold and has another 120m to dig into the existing pit.

During a site visit by the Herald this week, when a fair share of the 2.1m annual rainfall was pelting down, mining had been suspended for the day but development work around the pit rim was continuing, a digger snapping regrowth beech trees as if they were matchsticks.

But what conservationists describe as a "sore" on the landscape will become a lake when mining has finished and the rainforest regrown as happened the last time the area was mined following a boom which began in 1860.

Melbourne-based and listed in New Zealand, Australia and Canada, OceanaGold has been one of the strongest performing large to mid cap performers on the NZX over the last 15 months, yesterday closing at $3.15 after hitting just 26c as the global financial crisis and a troubled gold and copper project in the Philippines weighed on the stock.

A soaring gold price, reserves upgrades in line with forecasts and market acknowledgment of a mining cost containment have contributed to the share rally.

Chief operating officer Mark Cadzow oversaw the growth of both New Zealand mines - near Dunedin the Macraes operation was a tussock- and gorse-covered hill when he arrived 20 years ago and the area behind Reefton was early this decade pocked by old workings with names reflecting hope and desperation.

The tour of the mines for a group of mainly Australian analysts was focused on existing and potential gold resources for conversion to the market critical reserve figures but Cadzow was keen to share his strong views on the mining debate sparked by the Government review of Schedule Four land.

"It's rubbish to say that because 7000ha or so has been opened up to exploration that it's all going to get mined - it's not."

The key conditions for mines to go ahead include proven resource, land ownership and permission, mining permits, resource consents and a truckload of money.

A Reefton-type project if developed on a new site would cost $200 to $300 million before gold would be poured.

"If you walked into a virgin site you've got two or three years of drilling before contemplating whether to put a mine there and that would cost you $50 million."

He gets animated when discussing what he sees as the sharp polarisation on the issue before the debate has started. "There is a huge amount of wealth that can be generated off a very small area. People aren't even willing to have the debate. The first part of having any worthwhile debate is that you need the facts."

While the value of other industries such as dairy and tourism was well known, the potential of mining was not.

"Mining's mature from the point of view that when we do things we do them right, but it's immature from the point of view that we don't know what's there. That's what the Government is saying - 'let's look at this opportunity and see if it's worthwhile to develop'."

What does the mining review mean for OceanaGold? Not much in the immediate future as the company boosted its exploration programme in existing tenements to $12 million although it is open-minded in the long term.

"We have two of the most prospective areas in the South Island, we're mostly [concentrating] on converting resource to reserve. We're always looking at other opportunities within New Zealand."

Cadzow, from the gold-rich Bendigo region of Victoria and a metallurgist by profession, gets steamed up by those who question the need for mining at all. "If you didn't want mining, civilisation wouldn't be what it is."

He points out to anti-mining types that almost any electronic gadget has some gold in it.

To borrow a Gerry Brownlee analogy, rather than a postcard-sized impact on the landscape, Oceana's is probably more in the postbox scale.

Cadzow makes no apologies for the less than surgical approach, saying the key to acceptability of open-cast mining is the putting right after it is finished.

At Macraes there are 50 million tonnes of rock, including gold-carrying ore, scooped from the open pit and Frasers underground mine at Macraes each year.

Underground, a series of tunnels and roads stretching 17km zigzag their way to a depth of 600m. After drilling and blasting, operators use remote-controlled loaders to fill 50-tonne dump trucks. There is also a diamond drilling exploration operation from a 1km long tunnel down to the downward sloping ore body.

"We've got a world-class ore body, a life of mine of six-plus years and we're looking to build on that."

In the pit, on average, one in 11 truckloads contains gold-bearing ore to be processed. They are big loads - 190 tonnes - which when processed produces 32oz of gold, about nine teaspoons full.

At Macraes, just 850ha of tenements stretching 27,000ha have been mined and of that 350ha has been rehabilitated as wetlands or restored as grazing land.

While a local field officer for Forest and Bird said she had not had time to monitor progress on the rehabilitation programme, the Otago branch of Fish & Game says because the mine is in a dry area there was no problem with pollution of waterways.

In historic mining cyanide used to liberate gold in processing that reached waterways has been deadly but Cadzow says it is effectively cleaned at the plant and does not pose a risk in tailings.

In partnership with the company, Fish & Game has a trout hatchery at the site from which thousands of fish have been released.

At Reefton, gold bearing ore is processed to a dried concentrate before being loaded on to trains to be carted 680km for processing into gold at Macraes. This avoids the need for cyanide in the forest, although that is allowed as necessary by the permit issued before commissioning in 2006.

Times to get the mine blew out in the lead up to commissioning because of the need for more consultation, given it is on DoC land.

Operations manager at Reefton Gareth Thomas says topsoil is scraped from the surface and stockpiled. After mining it will be spread on rock stacks and native trees replanted. The mine employs 190 staff, including contractors.

"This is a historic mining area. We don't have any tree-hugging issues around here, people around here are alot more pragmatic."

Forest and Bird spokesman Kevin Hackwell says his organisation will be looking closely at restoration work the company will do. Tailings from other big mine sites were an eyesore.

At Reefton the company has had to do catch-up exploration with a new team about to be boosted after Easter.

Cadzow is optimistic about extending the life of the operation in spite of "challenging" topography the varied rainfall and the shortage of local skilled labour.

"We think it has a fantastic history and we believe there's still substantially more to be discovered. If not we've still got another four or five years up our sleeves.

Mike Harrowell, a senior resources analyst at BBY in Sydney, said that New Zealand has tremendous potential if it encouraged the mining industry to invest in exploration, in a world that remains short of raw materials, and which is seeking new mining opportunities.

"The degree to which is New Zealand is under-explored is illustrated by the continued success that OceanaGold has achieved at Macrae's, and is likely to demonstrate at its Reefton operation."

The country had relatively under-explored geology in an English law-based country, at a time when mining companies are wrestling with issues of access and ownership of title in many regions of the world. New Zealand is perceived to be less well-endowed with major mineral deposits, compared to other Pacific Ring countries like PNG, Indonesia, or the Philippines.

"However, in the business of mineral exploration, it would be true to say that you do not know what you have until you find it."

Historical production from Macrae's operation was only 15,000oz of gold, but the current operation has produced over 2m oz of gold, and there is more to come," he says.

Encouraging mineral exploration by improving ease of land access, and government-funded regional geological and geophysical mapping programs, would increase the chances of attracting exploration dollars, and increase the chance of exploration successes.

"The smaller miners and explorers are likely to be the early participants, hence the need of a supportive exploration environment. If smaller companies discover world-class deposits, the majors would be sure to follow," Harrowell says.

Wellington sharebroking firm McDouall Stuart says New Zealanders were missing out on the opportunity to invest in the local resources sector.

Managing director Andrew McDouall says the country lags well behind Australia in this respect.

"New Zealand companies tend to be in this mid to small size and trade at far cheaper valuations than most of their Australian counterparts."

THE COMPANY
* Macraes goldfield comprises eight open pits producing 220,000 oz a year
* Pit mining has been operational since 1990.
* Frasers underground mine operational since 2008
* Reefton comprises four open pits producing 80,000oz a year
* Operational since 2006
* Oceana has produced 3 million ounces since 1990.
* Production last year was 300,391oz
* Staff of 800 with a wage bill of $57.2 million
* Gold bars produced at Macraes are around 93 per cent pure.They are flown to the Perth Mint for further refinement.

The Herald travelled to OceanaGold's mine sites with the assistance of the company