OCEANAGOLD ANNOUNCES COMMENCEMENT OF CONSTRUCTION AT THE DIDIPIO PROJECT IN THE PHILIPPINES
MELBOURNE, Australia, June 15, 2011 /CNW/ --
/NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES AND NOT FOR
DISTRIBUTION TO US NEWSWIRE SERVICES/
MELBOURNE, Australia, June 15, 2011 /CNW/ - OceanaGold Corporation (ASX:
OGC) (TSX: OGC) (NZX: OGC) ('the Company') is pleased to announce
construction activities have commenced and will progressively ramp up
in the coming weeks on the Didipio Project located in northern Luzon,
Philippines. Further pre-development studies have identified
opportunities to maximise project returns. The Project shows strong
economics with cash costs for the first 6 years averaging negative
$79/oz (net of bi product credits using US$3.00/lb Cu). Gold and copper
reserves have increased significantly along with average annual gold
production which is now 100,000 ounces per annum. The Board has
formally approved the remaining capital expenditure to complete
development of the Didipio Project.
In line with Canadian regulatory requirements, the Company will file an
updated NI 43-101 compliant technical report relating to the Didipio
Project.
Highlights of the Didipio Project:
-- Annual production of 100,000 oz Au ( 45%) and 14,000 t Cu
( 69%) on average over the Life of Mine
-- Increased gold reserves by 19% 1.68M oz
-- Increased copper reserves by 35% to 229Mt
-- Larger open pit with sustained higher ore supply rates
-- Increased plant throughput rates from 2.5Mtpa ramping up to
3.5Mtpa by end of 2014 to end of mine life
-- Internal Rate of Return (IRR) of 48% at current spot prices
(US$1530/oz Au & US$4.05/lb Cu)
-- Payback period of 2.2 years from January 1, 2013
-- Average operating cash flow of $150 million/year over first 3
years (using current spot metals prices)
Mick Wilkes, Managing Director and CEO commented, 'We are very pleased
to have commenced construction that will see commissioning on schedule
in the fourth quarter 2012. Over the past six months we have been
working hard to unlock significant value through adjustments to the
design of the mine, process plant and infrastructure which has seen
average annual gold production increase by 45% and average annual
copper production increase by 69% over the life of the mine. This
robust project will be transformational for OceanaGold and give us a
significant platform to expand further into the Philippines and
throughout Asia Pacific.'
The Didipio project is expected to produce annually on average 100,000
ounces of gold and 14,000 tonnes of copper at cash costs of US$356/oz
Au (net of bi product credits at US$3.00/lb Cu). For the first six
years of operations, gold production will be approximately 100,000
ounces per annum. However, with higher annual copper production of
18,000 tonnes per annum, cash costs will average negative US$79/oz (net
of bi product credits) over the same period.
The project demonstrates an internal rate of return of 48% at spot
metals prices.
The mine life has been shortened to 16 years with the open pit operating
throughout and the underground operation expected to commence
production in 2020. With the larger open pit design, the strip ratio
has increased to 3.45:1.
Additional Inferred resources totalling 15 million tonnes fall within
the currently designed open pit. These could potentially add 200,000 oz
of Au and 20,000 tonnes of Cu to the mine plan.
The following table provides a summary of the Definitive Project Design:
Table 1 - Definitive Project Summary
_____________________________________________________________________
| |Definitive Project Design |
|______________________________|______________________________________|
|Mine Reserve Life |16 Years |
|______________________________|______________________________________|
|Project Capex |US$185 million |
|______________________________|______________________________________|
|Remaining Capex |US$173 million |
|______________________________|______________________________________|
|Time to completion |Commissioning Q4 2012 |
|______________________________|______________________________________|
|Gold Reserves |1.68 million ounces of gold |
|______________________________|______________________________________|
|Copper Reserves |229,000 tonnes of copper |
|______________________________|______________________________________|
|Mining Method |Open Pit for Life of Mine |
| |Underground SLOS from Year 8 onwards |
|______________________________|______________________________________|
|Average Annual Production over|100,000 ounces of gold ( 45%) |
|Life of Mine |14,000 tonnes of copper ( 69%) |
|______________________________|______________________________________|
|Cash costs * |(US$79) per ounce of gold net of bi |
| |product credits over the first 6 years|
| |US$356 per ounce of gold net of bi |
| |product credits over the life of mine |
|______________________________|______________________________________|
|Throughput |Expected to reach 3.5Mtpa by end of |
| |2014 with potential further expansions|
|______________________________|______________________________________|
|Strip Ratio |3.45:1 |
|______________________________|______________________________________|
* Using US$3.00/lb copper. Cash costs over the first 6 years
of the mine life are Negative US$79 per ounce.
Mining
Open pit mining at Didipio will be undertaken by a mining contractor and
will comprise of six stages over 14 years taking the open pit to 270
meters below the valley floor. Access to the pit will be via a double
ramp with the maximum planned mining rate of 24Mtpa. Total material
moved over the life of mine will be 199Mt, of which 44.7Mt will be ore,
resulting in a Life of Mine strip ratio of 3.45:1. The increased mining
rates and larger open pit will allow for quicker access to the higher
grade gold than would have been mined via underground methods later in
the mine life.
Importantly, the new open pit design allows for high feed rates to the
process plant to be sustained as well as greater leverage to strong
metal prices by converting more of the resource into reserves.
Underground mining will be via a sub-level open stoping (SLOS) operation
with cemented paste backfill. Access to the underground via decline
from the side of the open pit will commence in 2016 with underground
production currently planned for 2020, ramping up to 1.2Mtpa by 2023.
Underground mining is expected to take place for at least six years and
will run concurrently with the open pit operation.
Figure 1 - Didipio Project Mine Design
Processing
The process plant will commence operations at 2.5Mtpa, then by utilising
the modified conservative design, ramping up to 3.5Mtpa by the end of
the second year. Various adjustments to the process plant have been
built into the design in order to optimise throughputs and allow for
significant expansion. Some of these changes include: addition of flash
flotation to the flotation circuit to ensure optimal recovery with the
expectation of a coarser grind in order to maximise throughputs;
expansion of the tailings system now designed to 3.5 Mtpa; addition of
expert systems and other plant automation to improve control and
utilisation; and an adjustment to the plant layout to allow for
relatively easy plant expansion in the future. Additionally, minor
capital has been budgeted in the first year of operations to make
upgrades to conveyor drives and pump drives if necessary to achieve the
3.5mpta throughput rate.
Tailings Storage Facility
The Tailings Storage Facility (TSF) has been re-designed resulting in
changes to accommodate for an increased capacity to 50 million tonnes
and the larger open pit footprint. Additionally, the location of the
TSF has been moved to a tributary catchment of the Didipio valley to
reduce the water catchment area making construction during the wet
season easier to manage and therefore lowering the risk of weather
related construction delays.
Capital Costs
Total capital costs for the project are US$185 million with
approximately US$12 million spent as at May 31, 2011 leaving US$173
million left to spend to complete the project. Construction will take
place over the next 15-18 months with commissioning of the process
plant on schedule for Q4 2012.
The increase in the remaining capital for the project from US$140
million to US$185 million is reflective of the inflationary environment
for mining projects globally today and a result of changes to the mine
design in order to increase production rates and take full advantage of
stronger metals prices earlier in the mine life. These changes to the
mine design include:
-- Addition of Flash Flotation
-- A 33% increase to the power facility in order to facilitate
increased mill throughputs
-- Additional capacity in the Tailings Storage Facility
-- Larger piping and pumping capacity to the tailings storage
facility
-- Addition of an expert milling system
The capital expenditure profile is estimated to have 35% spent over the
remainder of 2011 and the remaining 65% spent during 2012. The
additional working capital associated with the start-up of the
operation will be expended primarily in H2 2012.
Operating Costs
Cash operating costs for the project are expected to be negative US$79
per ounce for the first 6 years of the operation net of copper bi
product credits using US$3.00/lb Cu. Over the life of mine, cash
operating costs are expected to average US$356/oz.
Implementation Plan
The project detailed engineering and procurement contract re-commenced
in Q1. The detailed engineering is expected to be completed over the
next six months in line with the construction schedule.
Led by Martyn Creaney, Project Director - Didipio, the OceanaGold
in-house construction and management team of 20 professionals is fully
engaged with all aspects of the project with near term focus on
mobilisation of local contractors for access road repairs, site
infrastructure and accommodation camp construction.
Approximately 90% of the equipment for the process plant has been
received or is under contract. All major items of equipment including
the crusher, mills, flotation cells, motors and major pumps are in safe
storage or have been ordered. Tenders for site earthworks and
infrastructure have been received and contracts have been placed for
road upgrades and camp construction.
Expressions of interest have been received from potential mining
contractors and tendering of the mining contract will commence in July.
Community and Government Relations
OceanaGold continues to undertake social and medical programs in the
communities of northern Luzon. Most recently the second phase of a
clean water infrastructure system was completed providing potable water
for members of the local community. Two medical missions were hosted in
May treating more than 500 patients in Upper Tucod, Nueva Vizcaya and
Lower Tucod, Quirino. Additionally, various capacity building training
programs commenced in the areas of general book keeping and accounting,
carpentry, masonry, plumbing as well as innovative programs in
agriculture management.
Road repair contracts have been placed with locally based contractors
and the Company also expects to sign a new Memorandum of Agreement in
the coming months with the local Didipio Barangay Council which
outlined OceanaGold's continued commitment and close partnership with
the local communities.
Reserves
The new reserve model for the project demonstrates a 70% increase to the
reserve tonnage and now totals 50.7 million tonnes compared to the 29.7
million tonne reserve in the earlier design. This has resulted in a 19%
increase in gold reserves and a 35% increase in copper reserves
utilising a US$950 / oz gold price and $2.85 / lb copper.
Mineral Resources
The estimate of Measured and Indicated Mineral Resources as at June 1,
2011 has increased by 0.13 Moz of gold and 0.02 Mt of copper compared
to the Company's most recent resource/reserve update as at December 31,
2010, while the estimate of Inferred Mineral Resources has increased by
0.13 Moz of gold and 0.02 Mt of copper compared to the December 31,
2010 update. These increases are due to the lowering of the open pit /
underground resource reporting boundary (from 2,540mRL to 2,390mRL) to
the base of the expanded open pit. This has resulted in a greater
proportion of the total resource being reported at the 0.4 g/t eqAu
open pit cut-off.
Class Mt Au g/t Cu % Au Moz Cu Mt
Measured 15.96 1.67 0.56 0.86 0.09
Indicated 54.21 0.73 0.37 1.27 0.20
Measured & Indicated 70.17 0.95 0.41 2.13 0.29
Inferred 30.73 0.44 0.23 0.44 0.07
Notes:
1. Mineral Resources are inclusive of Mineral Reserves
2. Mineral Resources above the 2,180mRL and below the 2,390mRL at a
1.5 g/t eqAu cut-off grade, and above the 2,390mRL at a 0.4 g/t
eqAu cut-off grade . Gold Equivalence (eqAu) = Au g/t 2.06 x Cu
%, based on metal prices of US$950/ounce for gold and
US$2.85/pound for copper.
3. There can be no assurance that those portions of mineral resources
that are not mineral reserves will ultimately be converted into
mineral reserves. Mineral resources are not mineral reserves and
do not have demonstrated economic viability. These mineral
resource estimates include inferred mineral resources that are
normally considered too speculative geologically to have economic
considerations applied to them that would enable them to be
categorised as mineral reserves. There is also no certainty that
these inferred resources will be converted to measured and
indicated categories through further drilling, or into mineral
reserves once economic considerations are applied.
Mineral Reserves
Mineral reserve estimates as at June 1, 2011 have increased by 20.93
million tonnes compared to the December 31, 2010 resource/reserve
update.
Source Class Tonnes Au (g/t) Cu (%) Au (Moz) Cu (kt)
Open Pit Proven 13,790,000 1.60 0.59 0.71 81
Probable 30,950,000 0.55 0.39 0.55 121
Underground Probable 5,910,000 2.25 0.45 0.43 27
Total Proven 13,790,000 1.60 0.59 0.71 81
Total Probable 36,860,000 0.82 0.40 0.97 148
Total Proven and 50,650,000 1.03 0.45 1.68 229
Probable
Notes: Reserves are based on the following metal price assumptions:
US$950/ounce Au and US$2.85/lb Cu. Using a copper gold equivalence
factor of Au (g/t) eq = 2.06 x Cu(%), the Cut-off grade for the open
pit reserve is 0.5g/t AuEq and for the underground 1.9 g.t AuEq.
400kt @0.67 g/t and 0.24% Cu of the underground low grade 'mineralised
waste' is part of the ore inventory as it is necessary underground
development material that must come to surface, at which point it is
economically attractive to treat it rather than send it to waste based
on processing, overheads and concentrate costs.
For further information on the Didipio Project, please refer to the
'Technical Report for the Didipio Project' dated 29 October, 2010 which
is available on SEDAR under OceanaGold Corporation.
Qualified Persons
Mr. Jonathan Moore (BSc (Hons) Geology, GradDip (Physics)) Principal
Resource Geologist for OceanaGold is the Qualified Person under NI
43-101 responsible for the Didipio Project resource estimates contained
herein. Mr Moore has reviewed and approved the references to the
resource estimate in this release.
Mr Rodney Redden (BE, mining, MBA, MAusIMM) Technical Services Manager
for OceanaGold is the Qualified person under NI 43-101 responsible for
the Didipio Project reserve estimates contained herein. Mr Redden has
reviewed and approved the references to the reserve estimate in this
release.
Conference Call
The Company will host a conference call to discuss the Didipio Project
at 9.00am on Wednesday 15 June 2011 (Melbourne time).
Local (toll free) dial in numbers are:
Australia: 02 9696 0911 or 03 8744 4600
New Zealand: 0800 452 573
Canada & North America 1866 793 3093
All other countries (toll): 61 2 9696 0911
To view the full company release, including images please refer to the
company's website www.oceanagold.com
About OceanaGold
OceanaGold Corporation is a significant Asia Pacific gold producer with
projects located on the South Island of New Zealand and in the
Philippines. The Company's assets encompass New Zealand's largest gold
mining operation at the Macraes goldfield in Otago which is made up of
the Macraes Open Pit and the Frasers Underground mines. Additionally on
the west coast of the South Island, the Company operates the Reefton
Open Pit mine. OceanaGold produces approximately 270,000 ounces of gold
per annum from the New Zealand operations. The Company also owns the
Didipio Project in northern Luzon, Philippines where construction
activities are now underway.
OceanaGold is listed on the Toronto, Australian and New Zealand stock
exchanges under the symbol OGC.
Cautionary Statement regarding Forward Looking Information
Statements in this release may be forward-looking statements or
forward-looking information within the meaning of applicable securities
laws. Any statements that express or involve discussions with respect
to predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or performance (often, but not always,
using words or phrases such as 'expects' or 'does not expect', 'is
expected', 'anticipates' or 'does not anticipate', 'plans', 'estimates'
or 'intends', or stating that certain actions, events or results 'may',
'could', 'would', 'might' or 'will' be taken, occur or be achieved) are
not statements of historical fact and may be forward-looking
statements. Such forward-looking statements include, without
limitation, statements with respect to any future resources or reserves
attributable to the Didipio Project, estimated production from the
Company's existing properties, development of the Didipio Project,
economic analysis relating to the Didipio Project and commencement of
construction and completion of the Didipio Project. Forward-looking
statements are subject to a variety of risks and uncertainties which
could cause actual events or results to differ from those reflected in
the forward-looking statements including, among others, the accuracy of
mineral reserve and resource estimates and related assumptions,
inherent operating risks and those risk factors identified in the
Company's Annual Information Form prepared and filed with securities
regulators in respect of its most recently completed financial year.
There are no assurances the Company can fulfil such forward-looking
statements and, subject to applicable securities laws, the Company
undertakes no obligation to update such statements. Such
forward-looking statements are only predictions based on current
information available to management as of the date that such
predictions are made; actual events or results may differ materially as
a result of risks facing the Company, some of which are beyond the
Company's control. Accordingly, readers should not place undue
reliance on forward-looking statements. It is also noted that mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/June2011/14/c6085.html
Ms Nova Young
Investor Relations Officer or
Mr Darren Klinck
Head of Business Development
Tel: 61(3) 9656 5300