OceanaGold gearing up on two fronts

Kalgoorlie, Western Australia — OceanaGold (OGD-A) is finally advancing two of its key gold projects on the South Island of New Zealand.

The New Zealand gold miner has experienced a series of stops and starts in its attempts to begin decline mining on its Macraes gold project, north of Dunedin. On the northern part of the South Island, OceanaGold has been through more than a decade of permitting and related studies during its efforts to re-open a gold mine in the Reefton goldfield.

But it seems brighter days are ahead. OceanaGold is finally taking strides in its quest to achieve annual production of more than 300,000 oz. gold annually within a few years.

Part of the progress has resulted from a changing of the guard. Steve Orr, the former head Barrick Australia, was named chief executive officer shortly after the original company, GRD NL, hived off its gold assets in last year’s OceanaGold float. The float raised A$100 million, half of which went to GRD.

Albert Brantley was later appointed chief operating officer, after helping develop several mine and power utilities in the Middle East.

One of the first tasks undertaken by new management was changing from a straight decline at Macraes, which had seen limited progress over two years, to the development of a temporary decline near the big Frasers open-cut mine. This will provide quick access to the first panel of higher-grade ore. The decline will also be used to test underground targets.

At the recent Diggers & Dealers forum, Orr said that the temporary decline could be followed by another decline situated farther back to focus on the second panel of ore.

If conditions suit, the temporary mine also could be retained as a single decline.

Orr’s presentation outlined how OceanaGold is finding ways to counter rising mine and mineral processing development costs for both the Frasers underground project and the evolving Globe Progress open-cut mine, the first development at Reefton.

Underground mining at Macraes will now focus only on the levels containing the higher grade ore. This will result in less tonnage but the grade brought to surface would average roughly 3 grams gold per tonne, much higher than the original plan of 2 grams per tonne.

The first ore from the underground operation is expected in the last quarter of 2006 and production for that year is slated to be about 15,000 oz. gold. In 2007, the operation should ramp up to about 65,000 oz. gold at cash costs just shy of NZ$400 per oz. (US$278 per oz.).

The company is looking at hiring a contract miner for the Macraes underground operation. Despite the serious shortage of underground miners, as a result of the mining boom in Australia and elsewhere, Orr thought the Otago province would provide an attractive lifestyle for mining personnel. Any employees of engineering firm Henry Walker Eltin working on the project, would be offered a position with the new contractor.

At Reefton, meanwhile, exploration drilling has expanded Globe Progress reserves to 7.2 million tonnes grading 2.6 grams gold per tonne, or 605,000 contained ounces, up from 471,000 oz. previously. The operation would last about eight years.

Project development costs have been reduced NZ$7 million (US$4.8 million) through the use of a smaller concentrator, which was acquired from the now-defunct West Australian mine. Concentrates will be sent by rail from Reefton to Palmerston, and then road hauled to the pressure-oxidation plant at Macraes.

Orr told delegates that there was significant potential for more orebodies in the Reefton field and that OceanaGold will spend most of its NZ$7 million (US$4.8 million) exploration budget there.