Mining chief saddles up for marathon project

OceanaGold has given the green light to its Didipio mine after it was stalled three years ago. Photo / Supplied

OceanaGold's chief operating officer, Mark Cadzow, yesterday set off by bike from Nelson, intending to ride to Invercargill over the next week - that's about 160km a day.

Over the next two years, he's facing another mega task - overseeing the building of a gold and copper mine in the Philippines.

The company put the mine into "care and maintenance" in 2008 following a spike in capital costs and doubt about whether it could go it alone, without a joint venture partner.

However, with the completion of a new economic and technical study late last year and the prospect of continuing strong gold prices, OceanaGold has pressed the go button on the US$220 million ($286 million) Didipio project which will carve into a hill in the northern Philippines.

The mine has reserves of 1.4 million ounces of gold and, importantly, 170,000 tonnes of copper. Prices for copper have more than tripled since 2008 and are nearing US$10,000 a tonne.

Oceana has not only faced financial hurdles, it has also drawn opposition from indigenous groups and international human rights watchers who said locals were being forced off their land and complained of pollution of the area.

OceanaGold says it has tenure agreements with owners of 80 per cent of the land in hill country the mine is in and says that in the two years the brakes were put on the project, the company has been able to put emphasis on a high level of community relations, environmental compliance and building relations with the local and national government.

Cadzow says there will always be opposition to mining no matter where it is but locals will get most of the 300 to 400 jobs and were already benefiting from a medical centre the company ran in the area.

"For the operations it's a matter of getting that mix of local talent and expats," he said late last year.

The 54-year-old Australian faces numerous two-day journeys from his Dunedin base to the Philippines where the dry Otago heat or biting cold is replaced by extreme humidity at the mine site.

"You go for a swim inside your shirt."

Cadzow has been involved with the New Zealand operations for almost 20 years including overseeing the development of the Reefton open cut and Frasers Underground mines in 2007 and 2008 before taking over the operations role. In the Philippines he will work closely with recently appointed project director Martyn Creaney to gradually introduce the key operating personnel to the Didipio project as it advances through construction and commences commissioning in early 2013.

Cadzow grew up in Charleton, a small town in the Goldfields region of Victoria. He did his training as a metallurgist in what was the Bendigo School of Mines.

He worked for BP for seven years in coal and minerals research during which time he had a number of patents registered.

He did a masters at Swinburne Institute and then went into business that involved refining techniques using coal agglomerates to pick up gold particles during the processing stage. It was work he was able to further put into practice when he took the senior metallurgist job at what was then Macraes Mining Company in 1991.

He adapted Oceana's autoclave processor - a giant pressure cooker to oxidise ore - for local conditions. The resulting recovery rates are seen as key to the company's success and why its autoclave attracts attention from gold mining companies around the world.

During the past 10 years Cadzow has overseen a development boom at Macraes where the pit has been dug deeper, Frasers underground mine has been developed on the Otago site and the Reefton open cut mine was commissioned.

Since 2007, flotation concentrate from the Reefton mine has been transported by rail and road to utilise surplus autoclave capacity at the Macraes site, 80km northwest of Dunedin.

They were big projects - Reefton cost $77 million to develop, $55 million was spent on Frasers and the autoclave cost $35 million to upgrade.

Cadzow says the company will spend a further US$140 million on Didipio but will not take its eyes off the ball in New Zealand where it has produced more than three million ounces.

"We've got to maintain the New Zealand assets we've got at the moment, keep up the consistency and organically grow."

It is spending $12 million on exploration a year and last month announced it will extend drilling at Reefton after pleasing results from its exploration programme.

OceanaGold hoped to extend its Globe Progress mine, by either open cast or underground mining, and the open cast Souvenir mine was also being redesigned to increase its reserve after encouraging drilling results.

A Sydney-based resources analyst for Austock, Anna Kassianos, says the signs are positive for Oceana at Reefton.

An update to the Reefton technical report later this month was expected to add to the life of the mine and this was a catalyst for de-risking its operation.

She said that costs are in a "state of flux," with increased mining rates expected to push cast costs to US$667 per ounce of gold but these would normalise with group costs potentially halving for the first full year of Didipio's production in 2013.

At Didipio US$80 million has been spent building the main access road, completing 60 per cent of the bulk earthworks, buying and storing most long lead-time items for the processing plant and partially completing site infrastructure such as offices.

YELLOW v WHITE GOLD

* OceanaGold says its current NZ mines utilise 1110ha which have generated a direct economic contribution of $2.4 million per hectare over the 20 years of operation. According to the company the total dairy industry utilises 2.1-2.2 million hectares and generates an average of $4160 per hectare per annum of economic contribution.
* At this level, the company has calculated it would take dairying 575 years to generate the same amount of economic contribution on the same amount of land that OceanaGold has over the past 20 years.