OceanaGold 1Q profit drops on reduced sales; to buy Waihi gold mine

OceanaGold Corp, which operates the Macraes gold mine in Otago, reported a 58 percent drop in first-quarter profit with sales down from a year earlier, and announced plans to buy the Waihi Gold Mine for US$101 million.

Net profit fell to US$24.5 million in the three months ended March 31, from US$58.9 million a year earlier, the Melbourne-based company said in a statement. Sales declined 24 percent to US$129.3 million and earnings before interest, tax, depreciation and amortisation sank 40 percent to US$60.7 million.

The miner announced plans to buy Newmont Mining Corp’s Waihi operation for cash, plus adjustments. Newmont will keep a 1 percent net smelter royalty for gold ounces mined from one specific tenement, capped at 300,000 ounces of production. The deal is subject to regulatory approvals and due diligence, OceanaGold said. The transaction will be funded through existing cash and undrawn bank debt.

“The efficiencies implemented a year ago in New Zealand along with lower fuel prices and a more favourable exchange rate have translated into a more robust business with even stronger profit margins,” chief executive Mick Wilkes said. “We are also pleased at the prospect of acquiring the Waihi Gold Mine from Newmont as we have long believed this high-quality asset strategically complements our existing portfolio.”

OceanaGold returned to profit in 2014 after it posted a loss a year earlier writing down the value of its Macraes goldfield in Otago, which is slated for closure in 2017.

It is since looking at ways to extend the life of the mine by another three to five years, and expects to complete a scoping study in the middle of the year.

OceanaGold also reaffirmed its outlook for production growth in the coming year. It expects between 195,000 and 215,000 ounces of gold produced at its New Zealand operations, compared to 201,207 ounces in 2014, and between 100,000 and 120,000 ounces of gold and 21,000 to 23,000 tonnes of copper from the Philippines, compared to 106,256 ounces of gold and 25,010 tonnes of copper last year. Cash costs are expected to be between US$450 and US$530 per ounce across all regions, and all-in sustaining costs are forecast to be in a range of US$770-to-US$840/ounce.

The miner produced 91,146 ounces of gold in the first quarter and 6,102 tonnes of copper, with gold sales of 86,234 ounces at an average price of US$1,195 and copper sales of 6,245 tonnes at an average US$2.24 per pound.

OceanaGold generated an operating cash flow of US$43.2 million in the three months ended March 31, down from US$73.3 million a year earlier, and increased its cash position by US$8.4 million to US$59.6 million at the balance date.

The triple-listed shares last traded at $2.51 on the NZX, and have gained 14 percent this year.

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