KEY POINTS:
Otago-based Oceana Gold Corp, a quarter of the way into tunnelling for its $70 million Frasers underground project, is making the most of spot market gold sales as world prices edge towards US$800 ($1045) an ounce.
While Australian gold majors Newcrest Mining and Lihir Gold have sold down their respective forward contract orders on their hedge books, Oceana is working towards reducing its forward orders from about 40 per cent of its production at present to zero by the end of 2010, chief executive Steve Orr says.
About 60 per cent of Oceana's gold is sold on the world spot market. This is expected to steadily increase as more gold becomes available from the West Coast operations and the Frasers underground mine, which in its development phase has already delivered gold worth $17.4 million. Overall production will be boosted to the forecast 300,000 ounces by the end of next year.
"Absolutely. There's no question we're making the most of spot prices," said Melbourne-based Orr.
Of next year's forecast 300,000 ounces production, 113,000 ounces will be sold on forward order contracts of $773 an ounce, which at last week's prices were worth $1194 an ounce.
The high price of gold would be positive for Oceana, using the spot gold prices, ABN Amro Craigs broker Peter McIntyre said.
In times of geopolitical instability or tension, such as the present conflicts in Iraq, investors go to gold as a safe haven investment.
- Otago Daily Times
