KEY POINTS:
Oceana Gold Corp says its December quarter gold production jumped 47 per cent from a year earlier to 63,505 ounces.
Costs were US$556/oz, against guidance of US$570-$580/oz.
Chief executive Steve Orr told a briefing the strong December quarter had been expected.
The company had also expected a challenging first three quarters last year thanks to a significant waste removal programme at the open pit at Macraes mine near Dunedin.
"However, this was completed on time as forecast by the end of the September quarter when we resumed mining ore-grade material in the pit."
Performance at the new Reefton Mine on the West Coast had improved.
"As a result, concentrate production increased at Reefton and much higher grades went through the plant at Macraes, resulting in higher production and dramatically reduced cash costs per ounce for the quarter."
Orr noted said that with the Frasers underground mine operating the company would this year have three mines in action.
It forecasts between 280,000 to 300,000 ounces of gold to be produced at a cash cost of US$440 to US$460 an ounce.
The production cost is higher than Ocean's recent prospectus guidance mainly because of the rise of the NZ dollar from US68c early last year to US68c.
Offsetting that, the gold price is up by about US$300/oz ($385) from January last year.
That has resulted in much higher margins and significantly higher cash flow.
To take advantage of the strong gold price, Oceana has recently rolled its hedge position in 2008 into 2011, leaving the company entirely unhedged this year.
The average grade through the mill at Macraes for the December quarter was 1.43 g/t, substantially higher then the earlier quarters of last year.
Oceana expected Macraes to mine similar grades of ore this year to the improved grades seen in the December quarter, Orr said.
The Frasers mine near Macraes was fully commissioned in early January and produced gold intermittently throughout 2007.
It produced more than 10,000 ounces in the December quarter.
Orr blamed uncertainty surrounding its Didipio mine in the Philippines for the fall in Oceana's share price from $4.15 half way through last year to $2.55 in mid-December. It last traded at $3.
"I think the market certainly expressed its disappointment with the performance of the New Zealand operations in 2007 and this was directly reflected in the share price.
"So there's a bit of a 'watch and wait' in the share price, but we're confident we can deliver and the strong December quarter demonstrates we are well on our way to doing that."
The share price had been affected by media reports about opposition to the Didipio operation, which Orr said were misrepresentations and inaccurate.
He said Oceana had good local support and government support and was doing its utmost to maintain that.
"We believe the market does realise the very significant value that exists within the Didipio deposit and how beneficial its strong cash flow and low cash cost will be for Oceana Gold's overall profile.
"We are a bit of an early mover there and while that presents challenges it also conveys enormous opportunities."
In the Philippines, Oceana is exploring a greenfields project called Manhulayan, south of Didipio, on the Northern Surigao Peninsula.
Orr said it had a very strong surface expression of a copper/gold porphyry.
- NZPA
