OceanaGold: good news from the mine

[mistymountain]

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

[JBmurc]

I think OGC will continue to grow on the back of a stronger gold price $4 not out of the question this year

[elZorro]

I think OGC will continue to grow on the back of a stronger gold price $4 not out of the question this year

Hi JB, I see the new bug in V-Bulletin has got you repeating yourself. No matter..

Looks like you may be right, look at the share this morning, up 10% already. Wait until lunchtime when the Aussies kick in.

[xynz]

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.

[troyvdh]

Thanks misty...gee do i wish that I had bought more than the few i got at 22 cents....I have to admit that the main reason i bought more was the fact that OGC had reached a high of $4.80.....besides I have ridden around the reefton site....and I have to say ...spending a boozy night with a few miners in reefton was an education.......with Pike......are the ozzies stupid and arrogant or what....anyways...cheers...

[elZorro]

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 - XYNZ

Good point, there was a big change. Reefton is now supplying 50% of the gold recovered, but all that ore has to be transported a long way. Macraes is dropping back in terms of ore grade, 1.31 g/t instead of 1.77 g/t. But don't despair: 1.31 is still well above the breakeven point for unhedged gold I'm sure, it's doing a lot better than another exploration company I could name.. Maybe OGC will look at processing the Reefton ore over there at some stage, saving costs by using a local facility?

[JBmurc]

the high NZD gold price must be great going forward 1615oz NZD spot

[xynz]

Good point, there was a big change. Reefton is now supplying 50% of the gold recovered, but all that ore has to be transported a long way. Macraes is dropping back in terms of ore grade, 1.31 g/t instead of 1.77 g/t. But don't despair: 1.31 is still well above the breakeven point for unhedged gold I'm sure, it's doing a lot better than another exploration company I could name.. Maybe OGC will look at processing the Reefton ore over there at some stage, saving costs by using a local facility?

Actually, Reefton is only supplying about 33% of the gold recovered in Q4:

Reefton = 24,624 ozs

Macraes = 47,470 ozs

Total = 72,094

Even if they have to transport it for processing, I still don't see how a 10% increase in the amount of Reefton Ore being transported and processed translates into a 70% increase in total actual costs.

[elZorro]

Hi XYNZ, oops, very poor maths on my part

I can only offer the figure of 0.5g/tonne being a cutoff point for recovered gold in general, when the plant is right next to the mine. So transport costs could well be significant, no idea what they are per tonne transported? 20 tonne of Reefton ore would only hold say 60g or under 2oz gold, so two? extra handling costs and the transport fee itself would add up.

We need a mining expert on this query.

[xynz]

JBmurc has the following information in his/her sig:

In the U.S., it took nearly 200 years for debt to reach the $1 trillion level. Last year alone the debt was almost twice that and it’s now near $13 trillion. This happened in a relatively short period of time and all U.S. debt now amounts to about $250,000 per person.

http://www.youtube.com/watch?v=Wt1Lo...eature=related
the Obama deception
http://www.youtube.com/results?orig_...ig_query_src=2

He seems alarmed by the fact that, since 1976, the US debt has ballooned by over $12 trillion dollars. It makes him very concerned about something called the "Obama deception".

Why wasn't JBMurc concerned when the Republicans Ronald Reagan, George H W Bush and George W Bush were running up $9 Trillion of that $12 Trillion debt?

When he was President, Ronald Reagan Presided over a near quadrupling of US debt.

Under the Clinton Administration, things were finally turning around. Budget surpluses were reducing the debt.

George W Bush inherited those surpluses from Clinton. But Bush turned those surpluses into record breaking deficits and then nearly doubled the national debt. Bush and his "free market! deregulate everything!" cronies also ushered in the worst economic crisis since the Great Depression.

Now Obama has to clean up the mess left by Bush and Greenspan. The US economy was on the verge of another Great Depression collapse and according to Ben Bernanke, the only way to prevent it was to increase deficit spending.

After $9 Trillion of Republican debts and George W Bush's outgoing deficit of nearly $1 Trillion....JBMurc only finds his outrage AFTER Barack Obama becomes President.

JBMurc: IOKIYAR


http://en.wikipedia.org/wiki/United_States_public_debt