Oceana merger tipped to be finalised this week

Oceana Gold's twin development projects are under way with its Otago underground and West Coast open projects on the threshold of striking and mining gold-bearing ore.

Globe Progress at Reefton on the West Coast has begun blasting and hitting mineable ore, and its Frasers project at its East-Otago Macraes mine is also progressing to schedule.

Mining of Frasers for gold-bearing ore, in conjunction with the development, is on schedule to be fully commissioned by the end of 2007.

Tunnelling at the $70 million Frasers began in mid-April and, once completed, the 4.2km main decline will service dozens of off-shoot dead-end mining tunnels forecast to deliver an estimated 1000 tonnes of gold during eight years.

The company's performance during its third-quarter trading period was buoyed by selling gold at open spot- market prices, cushioning increased production costs.

Oceana's chief executive, Stephen Orr, said during the quarter the company experienced "significant growth" in the average gold price received, which was up 41 per cent on the same quarter last year.

The increase was a result of the company's hedge-book restructure which allowed 55 per cent of gold sales to be made at spot prices, he said in a statement yesterday.

ABN Amro Craigs investment adviser Peter McIntyre said production costs remained key issues for Oceana, because its cash reserves had declined during the last quarter from A$54 million ($62.8 million) to about A$40 million.

In the past month Oceana's shares had "drifted" between 70c and 80c, opening up yesterday at 75c.

However, due to the decline in international gold prices ABN has lowered its 12-month target price down $1.25 to $1.12, McIntyre said.

Gold production rose 3 per cent to 43,577 ounces (1.3 tonnes) on the same quarter a year ago and gold sales were up 10 per cent.

Oceana's merger with Climax Mining, a Sydney company with Philippine gold and copper mine developments, is expected to be finalised this week. The merged entity, to be called Oceana Gold, will be listed on the Australian and New Zealand stock exchanges.

McIntyre said because Oceana was going into the Philippines, market sentiment held that its overall risk profile had risen, even though the capitalisation (estimated to be A$409 million) had put it in a league of bigger companies.

- OTAGO DAILY TIMES