OceanaGold: good news from the mine
Given the last OGC thread had the word "trouble" in it and since then the SP has gone from 0.18 to 3.25 in 16 months I thought I'd be bold and start a new thread to reflect:
1. OGC resource upgrades
2. Mined gold being sold on spot market
3. Gold selling above US$1100
4. Record gold production
5. A dimming down of the GFC
6. The SP appreciation
Trouble at the Mine doesn't quite fit.
A key question I have is:
based on fundamentals of gold prices at this level and current mining production is the SP a fair price or are we going to expect continued price appreciation?
Some analysis as opposed to opinionating would be appreciated
Why has there been a 70% increase in total operating costs?!
I was interested in buying some OGC. But the quarterly numbers on page 7 of their 2009 "annual information form" (http://bit.ly/bL8qYc) shows a very disturbing trend. In the same year that they've become "100% unhedged", their total operating costs per oz of gold produced have risen by nearly 70%. During that time, total production slipped by 14% (from 84037 ozs to 72094 ozs) .
Q1 total operating costs: $444/oz (84037 ozs produced)
Q4 total operating costs: $750/oz (72094 ozs produced)
This is happening at the same time that the lower grade Macraes ore quality has dropped by about 25%. It looks like that led to a 30% drop in gold production for the same tonnage of Macraes mill feed that was processed.
During this time, the higher grade Reefton ore quality has remained stable. But from Reefton, it looks like they've gotten an 40% increase in gold production, for only a 10% increase in Reefton mill feed tonnage.
In Q1: 79% of production came from Macraes, while 21% of came from Reefton.
In Q4: 66% of production came from Macraes, while 34% of came from Reefton.
Overall, the total tonnage milled has remained constant, while gold production slipped by about 14%. There has been a significant shift in productivity, with the lower grade Macraes ores producing less and the higher grade Reefton ores producing more.
Even with the significant differences between the ore extraction processes for Macraes and Reefton, along with their different ore compositions: it sure seems odd that a 10% increase in Reefton tonnage, along with a 14% drop in overall gold production, would result in a 70% increase in total operating costs per oz.
If anybody can shed more light on that 70% increase, then I would sure appreciate it.