Oceanagold Provides Update For Reefton Mine In New Zealand

OceanaGold Provides Update for Reefton Mine in New Zealand

MEDIA RELEASE

27 June 2013

Oceanagold Provides Update For Reefton Mine In New Zealand

(MELBOURNE) OceanaGold Corporation (ASX: OGC, TSX: OGC, NZX: OGC) (the “Company”) announced today that the Board of Directors has approved a change in the mine schedule for the Reefton gold mine located in the West Coast region of the South Island of New Zealand. This adjustment to the mine plan defers a final cutback at the Globe Progress pit resulting in a two year reduction in the mine schedule and the mine transitioning into a care and maintenance phase mid-year 2015 pending an improvement in the gold price to extract the remaining resource. 

The Company intends to maintain its current access arrangement with the Department of Conservation through to 2019 as planned and will commence rehabilitation of areas not expected to be disturbed in the future. The plant and permanent equipment will be left in place during this period of care and maintenance and the Company will be evaluating other opportunities within the goldfield such as the underground potential of the Globe Progress ore body.  Additionally, a technical study is underway on the Blackwater project located approximately 15 kilometres south of the Reefton mine. The progression of this project is unchanged and should the project demonstrate positive economics and receive board approval, development activities could commence as early as 2014/2015.

Although gold production at Reefton will be reduced by some 110,000 ounces for the period 2015-2017, significant cost and risk reductions will be achieved under the revised plan resulting in approximately  NZ$40-$45 million (US$32-US$36 million) being reduced from the capital budget over the next two years.

In order to de-risk the next two years of production at Reefton, the Company has entered into a zero cost collar hedging program over the estimated production of 115,650 ounces of gold during that period. This program entails a series of bought gold put options creating a floor of NZ$1,600 (US$1248*) per ounce being established for 115,650 ounces commencing in July 2013 through to June 2015. This was financed through the sale of an equal number of sold gold call options creating a ceiling over the same period with a strike price of NZ$1,787 (US$1394*) per ounce.

The impact of this is that in the event the spot gold price on maturity of the option is less than NZ$1,600 per ounce, the Company will nevertheless effectively receive NZ$1,600 per ounce.  Should the spot gold price on maturity of the option fall between NZ$1,600 and NZ$1,787 per ounce the Company will sell the gold at the spot price.  Where the spot price of gold is above NZ$1,787 per ounce on maturity of the option, the Company will effectively receive $1,787 per ounce.  For reference, yesterday’s closing NZ$ gold price was NZ$1575 per ounce.  The put floor ensures at minimum that the operation is forecast to remain cash positive including all remaining capital expenditures and rehabilitation costs over the next two years.

Mick Wilkes, Managing Director and CEO commented, “OceanaGold has enjoyed strong support from the local and regional communities as well as the Department of Conservation since gold mining re-commenced at Reefton in 2006. During this time we estimate that approximately NZ$45 million of direct and indirect benefits are derived from the Reefton mine annually for the West Coast region alone. However, mining operations must generate sufficient risk-weighted returns in order to remain sustainable and unfortunately the decline in the gold price over the past two months has eroded much of the profitability at Reefton which has lead to this revised plan. While we are hopeful for an improved gold environment, we have taken the necessary steps to ensure a sustainable and profitable operation at Reefton over the next two years and we will continue to evaluate other opportunities across the goldfield including underground opportunities at the Globe Progress pit and historic Blackwater mine.”

ENDS

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