Oceana Gold stake review

Perth-based GRD - the 57 per cent majority shareholder of Oceana Gold in east Otago - is reviewing its A$100 million ($104.6 million) stake, possibly with a view to selling.

The former parent company is attributing the "majority" of its own half-yearly after-tax profit fall of 42 per cent to the under-performance of Oceana, New Zealand's largest gold miner, which has produced gold since 1990.

Research for stockbrokers Greenslades last week said: "Gold assets under review may be sold to fund [new UK] waste-business expansion."

GRD's net profit after-tax fell 42 per cent from $A7.38 million for the corresponding period last year to $A4.26 million, GRD said in its just released half-year report for the period to June.

GRD executive chairman Brettney Fogarty said while engineering subsidiary GRD Minproc had a good first-half performance, that "was offset by the under-performance of Oceana Gold".

However, a GRD spokesman said the "majority" of GRD's profit loss was attributable to Oceana, but he would not be drawn on the possibility of a sell-down.

"From time to time, investments are periodically reviewed. We will be reviewing Oceana's performance to see what opportunities are presented," he said.

GRD's separate half-year update, report and announcements to the New Zealand and Australian stock exchanges all said GRD's A$100 million holding in Oceana was "under review".

Oceana's half-year after-tax profit was A$4.95 million, less than half of last year's A$11.33 million, and bullion sales were down from 55,484 ounces to 53,603 ounces for the same periods.

The company's earnings were expected to be "subdued" during the year, "predominantly due to [its] below-budget operating performance", the report said.

Greenslades client adviser Peter McIntyre said Oceana's main concern was escalating production costs, which were making it more capital-intensive than other low-grade ore miners in Australia and New Zealand.

"Whether there is a natural buyer around for Oceana is the unknown factor," he said.

He noted GRD had raised A$595 million from five Australian banks for a new waste-management project in the UK and it hoped to raise a further A$105 million, possibly through a rights issue.

Oceana shares have been languishing at 40 per cent below issue value. Prospectus guidance on Oceana achieving 350,000-400,000 ounces gold production by 2006-07 was revised down to about 290,000 ounces last month.

- NZPA