Media Release - OceanaGold on track to deliver growth
MELBOURNE, July 28, 2011 /CNW/ --
NOT FOR DISSEMINATION OR DISTRIBUTION IN THE UNITED STATES AND NOT FOR
DISTRIBUTION TO US NEWSWIRE SERVICES
MELBOURNE, July 28, 2011 /CNW/ - OceanaGold Corporation (ASX: OGC, TSX: OGC, NZX: OGC) (the 'Company') has significantly enhanced the economics of its
Didipio Project in The Philippines which is on schedule to commission
in Q4 2012.
In its Second Quarter 2011 Results released today, OceanaGold confirmed
the start of construction activities at Didipio and substantial
increases to the Project's gold and copper reserves resulting in
forecast gold production of 100,000 ounces per annum over a mine life
of at least 16 years.
Exploration success was also achieved at the Company's Reefton operation
in New Zealand where early stage diamond drilling at the Big River
prospect returned several significant high grade results.
Revenue for the second quarter was $94.8 million, ahead of the prior
quarter and previous year. 61,335 ounces of gold was sold at an average
price of US$1,546 per ounce. Revenue for half year 2011 reached $185.6
million, significantly ahead of half year 2010 result of $128.5
million.
EBITDA (earnings before interest, taxes, depreciation and amortisation)
was $33 million for the second quarter and $77 million for half year
2011, a 62% increase on the $47.6 million EBITDA recorded for Half Year
2010.
Cash flow from operations was $29.2 million for the second quarter and
$76.3 million for half year 2011, another improvement on the half year
2010 result. Process plant throughputs as well as recoveries of 83.5%
for the second quarter also were strong and bettered the previous
quarter.
Cash costs in US Dollars continued to see pressure due to the weakness
in the US dollar and higher inputs, but this has been partly offset by
the continued strength in the gold price. As a result, the Company
updated its production guidance for the year and this is discussed in
detail in the Management Discussion and Analysis released today.
OceanaGold Managing Director & CEO, Mick Wilkes, commented, 'Didipio's
construction and commissioning scheduled for Q4 2012 is fundamental to
OceanaGold's growth strategy and with gold and copper prices continuing
to strengthen, we are well placed to optimise the outstanding economics
of this world class gold and copper project.'
He went on to say, 'Our exploration program in New Zealand is also
delivering consistent and exciting results that show great promise for
further mine life extensions and potential new organic growth
projects.'
Other highlights from the OceanaGold 2011 Second Quarter Results
include:
-- Sold 61,335 ounces of gold at cash operating costs of $921 per
ounce.
-- Posted a cash operating margin of $625 per ounce for the
Quarter and $670 per ounce for Half Year 2011, a 62% increase
on the Half Year 2010 figure of $414 per ounce.
-- Produced 61,988 ounces of gold for the Quarter and 127,659
ounces of gold for Half Year 2011.
-- Committed $1.87 million in exploration expenditure to several
programs across the Macraes and Reefton operations and
appointed a Philippines based Exploration Manager to lead the
Company's exploration program in that region.
Conference Call / Webcast
The Company will host a conference call / webcast to discuss the Q2 2011
Financial Results. The call will take place at 7.30am on Friday 29
July (Melbourne time) / 5.30pm on Thursday 28 July (Toronto time).
Details are available on the OceanaGold website at 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
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. 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 most recent Annual Information
Form prepared and filed with securities regulators. 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.
Management Discussion and Analysis of
Financial Condition and Results of
Operations for the Quarter & Half Year
Ended June 30, 2011
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Management Discussion & Analysis contains 'forward-looking
statements and information' within the meaning of applicable securities
laws which may include, but is not limited to, statements with respect
to the future financial and operating performance of the Company, its
subsidiaries and affiliated companies, its mining projects, the future
price of gold, the settlement and cancellation of the Company's hedging
facilities, the early redemption of the Company's convertible notes,
the estimation of mineral reserves and mineral resources, the
realisation of mineral reserve and resource estimates, costs of
production, estimates of initial capital, sustaining capital, operating
and exploration expenditures, costs and timing of the development of
new deposits, costs and timing of the development of new mines, costs
and timing of future exploration, requirements for additional capital,
governmental regulation of mining operations and exploration
operations, timing and receipt of approvals, consents and permits under
applicable mineral legislation, environmental risks, title disputes or
claims, limitations of insurance coverage and the timing and possible
outcome of pending litigation and regulatory matters. Often, but not
always, forward-looking statements and information can be identified by
the use of words such as 'plans', 'expects', 'is expected', 'budget',
'scheduled', 'estimates', 'forecasts', 'intends', 'targets', 'aims',
'anticipates' or 'believes' or variations (including negative
variations) of such words and phrases, or may be identified by
statements to the effect that certain actions, events or results 'may',
'could', 'would', 'should', 'might' or 'will' be taken, occur or be
achieved. Forward-looking statements and information involve known and
unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company and/or its
subsidiaries and/or its affiliated companies to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among
others, future prices of gold; general business, economic, competitive,
political and social uncertainties; the actual results of current
production, development and/or exploration activities; conclusions of
economic evaluations and studies; fluctuations in the value of the
United States dollar relative to the Canadian dollar, the Australian
dollar, the Philippines Peso or the New Zealand dollar; changes in
project parameters as plans continue to be refined; possible variations
of ore grade or recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes and
other risks of the mining industry; political instability or
insurrection or war; labour force availability and turnover; delays in
obtaining financing or governmental approvals or in the completion of
development or construction activities or in the commencement of
operations; as well as those factors discussed in the section entitled
'Risk Factors' contained in the Company's Annual Information Form in
respect of its fiscal year-ended December 31, 2010, which is available
on SEDAR at www.sedar.com under the Company's name. Although the Company has attempted to
identify important factors that could cause actual actions, events or
results to differ materially from those described in forward-looking
statements and information, there may be other factors that cause
actions, events or results to differ from those anticipated, estimated
or intended. Also, many of the factors are outside or beyond the
control of the Company, its officers, employees, agents or associates.
Forward-looking statements and information contained herein are made as
of the date of this Management Discussion & Analysis and, subject to
applicable securities laws, the Company disclaims any obligation to
update any forward-looking statements and information, whether as a
result of new information, future events or results or otherwise. There
can be no assurance that forward-looking statements and information
will prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements and information due to the inherent uncertainty therein. All
forward-looking statements and information made herein are qualified by
this cautionary statement.
This Management Discussion & Analysis may use the terms 'Measured',
'Indicated' and 'Inferred' Resources. U.S. investors are advised that
while such terms are recognised and required by Canadian regulations,
the Securities and Exchange Commission does not recognise them.
'Inferred Resources' have a great amount of uncertainty as to their
existence and as to their economic and legal feasibility. It cannot be
assumed that all or any part of an Inferred Resources will ever be
upgraded to a higher category. Under Canadian rules, estimates of
Inferred Resources may not form the basis of feasibility or other
economic studies. U.S. investors are cautioned not to assume that all
or any part of Measured or Indicated Resources will ever be converted
into reserves. U.S. investors are also cautioned not to assume that all
or any part of an Inferred Resource exists, or is economically or
legally mineable.
This document does not constitute an offer of securities for sale in the
United States or to any person that is, or is acting for the account or
benefit of, any U.S. person (as defined in Regulation S under the
United States Securities Act of 1933, as amended (the 'Securities
Act')) ('U.S. Person'), or in any other jurisdiction in which such an
offer would be unlawful.
Technical Disclosure
Dr Michael Roache, (BSc, MSc(hons), PhD) is the Head of Exploration for
Oceana Gold (NZ) Ltd and is a member of both the AusIMM and
Australasian Institute of Geoscientists. Dr Roache is a Qualified
Person under the Canadian Securities Administrators' National
Instrument 43-101 - Standards of Disclosure of Mineral Projects ('NI
43-101') for the technical disclosure in this document and has verified
the data disclosed, including sampling, analytical and test data
underlying the information contained in this document. Samples,
collected at 1m intervals, or less, from both reverse circulation chips
and sawn diamond core, were prepared and assayed by fire assay methods
at the OceanaGold facilities at Reefton, New Zealand, the SGS
facilities in Westport and Waihi, New Zealand and the ALS facilities in
Brisbane, Australia. Standard reference materials were inserted to
monitor the quality control of the assay data. Dr Roache has prepared
the technical information and approved the technical information in
this document.
For further scientific and technical information (including disclosure
regarding mineral resources and mineral reserves) relating to the
Reefton Project, please refer to the NI 43-101 compliant technical
report entitled 'Independent Technical Report for the Reefton Project,
located in the province of Westland, New Zealand' dated 9 May 2007,
which is available at sedar.com under the Company's name.
2011 Second Quarter Results
July 28, 2011
Management Discussion and Analysis of
Financial Condition and Results of Operations
for the Quarter & Half Year Ended June 30, 2011
HIGHLIGHTS
-- Board Approval for Didipio Project in the Philippines and
commenced construction activities during the quarter
-- Revenue of $94.8 million for the quarter with average gold
price received of $1,546 per ounce
-- The strengthening New Zealand Dollar to unprecedented levels
versus the USD is putting upward pressure on costs in USD
terms. The NZD/USD has strengthened 12% since the start of the
year to historical highs presently of $0.87
-- Sold 61,335 ounces of gold during the second quarter at a cash
cost of $921 per ounce
-- EBITDA (earnings before interest, taxes, depreciation and
amortisation) was $33.0 million for the second quarter
-- Early stage diamond drilling at the Big River project (Reefton)
returned several significant high grade results, including an
intercept (hole BR0004) of 20m @ 8.08 g/t Au (estimated true
width of 15.08m) from 127m depth, and 6.6m @ 21.37 g/t Au
(estimated true width of 5.03m) from 136.4m depth
-- Cash Balance June 30, 2011 $193.2 million
All statistics are compared to the corresponding 2010 period unless
otherwise stated.
OceanaGold has adopted USD as its presentation currency and all numbers
in this document are expressed in USD unless otherwise stated.
* EBITDA is a non GAAP measure. Refer to page 19 for explanation of non
GAAP measures.
OVERVIEW
Results from Operations
OceanaGold recorded revenue of $94.8 million for Q2 2011 from sales of
61,335 ounces at a cash cost of $921 per ounce.
The strength of the New Zealand dollar and cost pressures on inputs have
continued during Q2. Combined with slightly lower production levels,
this has resulted in higher USD denominated cash costs. The NZD/USD
exchange rate has strengthened 9% quarter on quarter and averaged $0.82
for reporting in Q2. Currently, the exchange rate has reached
historical highs of $0.87 and remains volatile. In H1, the exchange
rate alone added approximately $100 per ounce to the reported USD cash
costs versus plan.
Higher unit costs were partially offset by the continued strength in the
gold price received during the quarter which averaged $1,546 per ounce,
an increase of $145 per ounce over the previous quarter.
Production for the second quarter was below expectation with lower
productivity from the Frasers underground mine and mining rates at
Reefton also underperforming against plan. The lower gold sales
combined with continued pressure on labor and input costs alongside the
strengthening New Zealand Dollar (NZD) resulted in higher unit costs.
Despite challenges with mining movements at two of the three operations
during the quarter, process plant throughputs and recoveries remained
strong, with improvements in both compared with the previous period.
Cash flow from operations for the second quarter was $29.2 million
resulting in a total of $76.3 million for H1 2011.
Production & Cost Guidance
At the release of first quarter results in April, the Company indicated
if cost pressures continued, guidance would be reassessed. The Company
has now adjusted full year production guidance to 255,000 - 270,000 ozs
Au at cash costs of US$850-$890 per ounce (from 260,000-280,000 ozs Au
at cash costs of US$645-$685 per ounce). The higher cash cost guidance
is largely driven by a $123 per ounce increase associated with the
weaker USD, as well as slightly lower production in H1 2011, higher
input costs and a lower amount of capitalised mining. The updated cost
guidance is based on NZD/USD exchange rate of $0.88 for H2 2011.
Didipio Project
Construction activities commenced at Didipio during the second quarter.
Tendering processes are well underway for the construction and mining
work. Contracts have already been awarded and contractors mobilised for
upgrading the mine access road and construction of accommodation camp
facilities.
In June, the Company announced the results of a major re-engineering of
the Didipio Project which significantly enhanced the economics and
de-risked several critical aspects of the project.
Didipio demonstrates strong economics with cash costs for the first 6
years averaging negative $79/oz (net of by-product credits based on
US$3.00/lb Cu). Gold and copper reserves have increased significantly
along with average annual gold production now expected to average
100,000 ounces per annum over a mine life of at least 16 years.
The project is on schedule to commission in Q4 2012.
Exploration
The Company invested $2.0 million on exploration during the quarter with
the majority of that being incurred in New Zealand.
At Reefton, a number of exploration programs are in progress including
drilling at the exciting Big River prospect. Initial results from Big
River are promising and include an intercept (hole BR0004) of 20m @
8.08 g/t Au (estimated true width of 15.1m). Based on a similar soil
geochemical anomaly at the recently identified Crushington prospect, A
third drill rig is expected to commence drilling in the Reefton
goldfield in Q3.
Exploration continued at the Frasers Underground mine with
mineralisation being confirmed to the north and northeast of the
current workings and the deposit remains open in both directions.
Surface exploration programs at the Macraes goldfield targeting
extensions to the Frasers Underground mine between Panels 1 and 2
commenced in June.
Philippines exploration activities continue to focus on the Didipio FTAA
and follow-up of anomalous regional assay results with grid-based soil
sampling. Results are expected in Q3.
- Table 1 -
Key Financial and Operating Statistics
Financial Q2 Q1 Q2 Half Year Half Year
Statistics Jun 30 2011 Mar 31 2011 Jun 30 2010 Jun 30 2011 Jun 30 2010
Gold Sales 61,335 64,765 67,347 126,100 132,388
(Ounces)
USD USD USD USD USD
Average 1,546 1,401 1,191 1,471 971
Price
Received ($
per ounce)
Cash 921 687 564 801 557
Operating
Cost ($ per
ounce)
Cash 625 714 627 670 414
Operating
Margin ($
per ounce)
Non-Cash 349 296 277 322 274
Cost ($ per
ounce)
Total 1,270 983 841 1,123 831
Operating
Cost ($ per
ounce)
Total Cash 29.41 23.62 21.86 26.59 21.88
Operating
Cost ($ per
tonne
processed)
Combined Q2 Q1 Q2 Half Year Half Year
Operating Jun 30 Mar 31 Jun 30 2010 Jun 30 2011 Jun 30 2010
Statistics 2011 2011
Gold produced 61,988 65,671 67,541 127,659 132,832
(ounces)
Total Ore 1,763,297 2,005,085 1,872,020 3,768,382 3,944,110
Mined
(tonnes)
Ore Mined 1.23 1.21 1.38 1.22 1.42
grade
(grams/tonne)
Total Waste 15,335,678 14,387,602 13,405,239 29,723,280 28,001,200
Mined
(tonnes) -
incl
pre-strip
Mill Feed 1,920,854 1,876,154 1,737,669 3,797,008 3,373,327
(dry milled
tonnes)
Mill Feed 1.19 1.29 1.41 1.24 1.47
Grade
(grams/tonne)
Recovery (%) 83.5% 83.4% 84.0% 83.4% 83.0
___________________________________________________________________
| | | | | | |
|Combined | Q2 | Q1 | Q2 | Half Year | Half Year |
|Financial |Jun 30|Mar 31 2011|Jun 30 2010|Jun 30 2011|Jun 30 2010|
|Results | 2011 | $'000 | $'000 | $'000 | $'000 |
| |$'000 | | | | |
|____________|______|___________|___________|___________|___________|
| | | | | | |
|EBITDA |32,994| 43,998 | 39,169 | 76,992 | 47,648 |
|(excluding | | | | | |
|unrealised | | | | | |
|gain/(loss) | | | | | |
|on | | | | | |
|hedges) | | | | | |
|____________|______|___________|___________|___________|___________|
| | | | | | |
|Earnings/ |4,147 | 14,772 | 7,968 | 18,919 | (1,579) |
|(loss) after| | | | | |
|income tax | | | | | |
|and before | | | | | |
|undesignated| | | | | |
|gain/(loss) | | | | | |
|on hedges | | | | | |
|(net of tax)| | | | | |
|____________|______|___________|___________|___________|___________|
| | | | | | |
| | | | | | |
|____________|______|___________|___________|___________|___________|
| | | | | | |
|Reported |32,994| 43,998 | 39,155 | 76,992 | 63,864 |
|EBITDA | | | | | |
|(including | | | | | |
|unrealised | | | | | |
|gain/(loss) | | | | | |
|on hedges) | | | | | |
|____________|______|___________|___________|___________|___________|
| | | | | | |
|Reported |4,147 | 14,772 | 7,958 | 18,919 | 9,772 |
|earnings/ | | | | | |
|(loss) after| | | | | |
|income tax | | | | | |
|(including | | | | | |
|unrealised | | | | | |
|gain/(loss) | | | | | |
|on hedges) | | | | | |
|____________|______|___________|___________|___________|___________|
PRODUCTION
Gold production for the second quarter of 2011 was 61,988 ounces
bringing the total for H1 2011 to 127,659 ounces.
Cash operating costs for the second quarter of 2011 were $921 per ounce
bringing the average for H1 2011 to $801 per ounce. Cash costs for Q2
included a higher component of expensed waste as less volume was
allocated to pre-strip for the quarter. As noted in the Q1 report, the
Company continues to see pressure on its US$ costs due to the weakness
of the USD along with increases to labour and input costs. Lower gold
production during the quarter compared to Q1 also contributed to the
higher unit cost per ounce.
OPERATIONS
Macraes Goldfield (New Zealand)
The Macraes operations (open-pit and underground) reported one lost time
injury (LTI) during the quarter and this compares to one during the
same period last year.
Production from the Macraes Goldfield for the quarter was 44,107 gold
ounces and is consistent with the 44,157 ounces produced in the
previous quarter.
Total material mined at Macraes was 13.4 million tonnes, a 7% increase
on the previous quarter and attributable to the additional trucking
capacity brought on with two additional Caterpillar 789C dump trucks
delivered in the first quarter.
At the Frasers Underground mine, total ore mined was 178,000 tonnes
which was below expectation for the second quarter in a row. Labour
shortages in some of the key skilled operator positions continued to
hamper mining productivity. The skills development program implemented
during Q1 has made a positive impact but this has been partially offset
with continued loss of some senior operators resulting in a slower than
expected recovery back to planned production levels. Consistent
improvements have been demonstrated in June and July so the Company
expects to achieve improved production in Q3 with an objective to
return to planned levels in Q4.
Mill throughput and grade during the quarter was similar to the previous
quarter with 1.46 million tonnes being processed at an average grade of
1.12 g/t Au. Total gold production for Macraes was in line with
expectations with higher underground grades offsetting the lower
underground ore tonnage mined.
Gold recovery for the quarter was strong at 84.2% and higher than the
83.6% recovery reported in Q1 2011. Again, minimal direct leaching was
undertaken during the quarter which contributed to the higher overall
recovery rates.
Reefton Goldfield (New Zealand)
One Lost Time Injury was recorded during the quarter compared to one in
the same period last year.
Total material mined was 3.72 million tonnes compared with 3.84 million
tonnes in the preceding quarter. The transition to owner-mining during
the first half of this year has been successful with an increase to
manning implemented however retention of skilled and experienced
operators continues to be a challenge in the current labour market for
mining in Australia and New Zealand. While manning levels have
increased overall, many of the new recruits have less applicable
experience and this, combined with the turnover of more experienced
operators, has resulted in below plan mining rates. Development of
Souvenir pit and commencement of the Stage 7 cutback of the Globe
Progress pit at Reefton also slowed productivity generally during a
wetter than average Q2.
The process plant treated 462,426 tonnes, resulting in 881,958 tonnes
for H1 2011. The process plant continues to outperform and has resulted
in a higher % of low grade stockpiles being treated in order to
maximise capacity through the mill. This resulted in grade through the
mill of 1.42 g/t Au, well down on the previous quarter which was 1.84
g/t Au. As mining rates return to planned levels, more higher grade ore
will be delivered to the ROM pad and thus grade through the mill should
increase.
The lower mill feed grade also had an impact on the overall recovery
rate of 81.1% down slightly on the previous quarter at 82.4%.
Gold produced for the quarter was 17,881 ounces, compared with 21,514
ounces in the preceding quarter. In addition to improved mining rates,
production from the higher grade Souvenir pit will support a lift in
gold production through Q3 and Q4.
- Table 2 -
Macraes Operating Statistics
Macraes Q2 Q1 Q2 Half Year Half Year
Goldfield Jun 30 Mar 31 Jun 30 2010 Jun 30 2011 Jun 30 2010
Operating 2011 2011
Statistics
Gold produced 44,107 44,157 41,504 88,264 85,669
(ounces)
Total Ore 1,375,342 1,618,906 1,497,042 2,994,248 3,220,501
Mined
(tonnes)
Ore Mined 1.07 1.06 1.16 1.07 1.19
grade
(grams/tonne)
Total Waste 11,999,463 10,935,566 10,027,271 22,935,029 20,838,000
Mined
(tonnes)
incl
pre-strip
Mill Feed 1,458,428 1,456,622 1,336,605 2,915,050 2,626,543
(dry milled
tonnes)
Mill Feed 1.12 1.13 1.16 1.12 1.23
Grade
(grams/tonne)
Recovery (%) 84.2% 83.6% 83.9% 83.9% 82.7%
- Table 3 -
Reefton Operating Statistics
Reefton Q2 Q1 Q2 Half Year Half Year
Goldfield Jun 30 Mar 31 2011 Jun 30 2010 Jun 30 2011 Jun 30 2010
Operating 2011
Statistics
Gold produced 17,881 21,514 26,037 39,395 47,163
(ounces)
Total Ore 387,955 386,179 374,978 774,134 723,609
Mined
(tonnes)
Ore Mined 1.80 1.82 2.27 1.81 2.4
grade
(grams/tonne)
Total Waste 3,336,216 3,452,036 3,377,968 6,788,252 7,163,200
Mined
(tonnes)
incl
pre-strip
Mill Feed 462,426 419,532 401,064 881,958 746,784
(dry milled
tonnes)
Mill Feed 1.42 1.84 2.25 1.62 2.34
Grade
(grams/tonne)
Recovery (%) 81.1% 82.4% 84.3% 81.8% 84.3%
DEVELOPMENT
Didipio Project (The Philippines)
There were no lost time injuries at the Didipio Project for the quarter.
The Company announced the commencement of construction at the Didipio
Project in June. An update to the project plan was also provided which
demonstrates strong economics for the operation over a planned 17 year
mine life. The Board of Directors formally approved the capital
expenditure to complete the project with commissioning targeted for Q4
2012.
Highlights from project include an average annual production rate of
100,000 oz Au and 14,000 t Cu. Gold reserves increased by 19% to 1.68M
oz and copper reserves increased by 35% to 229,000t. Using US$3.00/lb
Cu as a by-product credit, the project is expected to produce gold at
negative US$79 per oz cash costs over the first six years of the mine
life.
Changes to the mine design have resulted in the reserve expanding from
approximately 30Mt to 50Mt. The process plant will be commissioned at
2.5Mtpa and will be ramped up to 3.5Mtpa by the end of year 2. Capital
cost forecast to complete the development at June 30th, 2011 is US$166
million (total capital costs are US$185 million).
By the end of the June quarter, three contracting companies had
mobilised their teams to site with more than 200 workers inducted into
the project thus far. More than half of these workers are from the
surrounding communities and the total number of construction related
workers is expected to reach 700 at peak construction in first quarter
2012. These initial teams are focused on road upgrades, accommodation
camp build-out, site earthworks, communication system installation and
establishing concrete supply . Management personnel on site are now
operating on regular rotations overseeing the day-to-day management of
construction.
During the third quarter, phase one accommodation and kitchen facilities
are expected to be completed. Upgrades to site infrastructure including
water, sewage and power for office and warehouse facilities are also
expected. Geotechnical works along with civil and concrete works on the
plant site are expected to commence in Q3. The tendering process for
the open pit mining contract is also underway.
The Company's ongoing commitment to community programs continued with
two medical missions hosted during the quarter in two local villages
with more than 500 patients treated. Additionally, the Company worked
with local organisations and co-operatives to establish new capacity
building agriculture programs focused in the areas of banana
production, poultry farming and composting. Funding was also provided
to source key farming equipment. In preparation for the construction,
twenty residents from local communities were sent to a construction
training centre near Manila for a month to provide them with basic
construction skills. Further work on improved water infrastructure for
the local community, funding of scholarships and teachers salaries also
continued throughout the quarter.
EXPLORATION
Exploration expenditure for the second quarter was $1.87 million.
New Zealand
Reefton Goldfield
A number of exploration programs are continuing at the Reefton
Goldfield. These include helicopter assisted diamond drilling, surface
geochemical sampling and prospect scale mapping.
The Globe Deeps preliminary geological interpretation has been completed
with a 95,000 ounce inferred resource announced on 30 May. The pit
optimisation study is at an advanced stage with infill and extension
drilling options currently being considered.
Helicopter assisted diamond drilling continued during the quarter at Big
River with 1,135 metres drilled and six holes (BR0002 to BR0007)
completed. Drilling is targeting narrow, high-grade gold mineralisation
associated with the historical Big River mine that produced 124,060
tonnes at an average grade of 34.1 g/t Au for a total of 135,974
ounces. Screen-fire gold assay results have been received for the first
five holes (BR0001 to BR0005) with several high-grade intersections
containing visible gold (Refer Figure 3 & Table A). These included an
intercept (hole BR0004) of 20m @ 8.08 g/t Au (estimated true width of
15.1m) from 127m depth which included 6.6m @ 21.37 g/t Au (estimated
true width of 5.0m). Mineralisation is currently open along strike to
the north and south as well as down dip. Helicopter assisted diamond
drilling is on-going with two rigs operating on this target. Future
drilling is planned to ascertain the overall strike length and down dip
extent of high grade gold mineralisation.
A diamond drilling program comprising a minimum of six holes for 750
meters at the Crushington group of historical mines commenced in July
targeting coincident arsenic-antimony-gold anomalies. Drilling is
targeting narrow, high-grade gold mineralisation adjacent to the
historical Ajax and Venus mines. This program is expected to be
completed during Q3. The Crushington group of historical workings
produced over 500,000 ounces of gold from ~960,000 tonnes of quartz at
an average grade of ~16 g/t Au and is located four kilometres north of
the Reefton processing plant.
Drilling at the historic Blackwater underground mine is expected to
recommence during Q4 2011.
Sampling programs using portable jack hammers capable of collecting
samples at up to 10 m below surface continue to provide encouraging
results with more than 442 samples collected. Sampling during the
quarter tested three main areas including the Crushington group of
historical mines, the Krantz Creek Shear, and the Cumberland prospect.
Sampling highlighted coincident gold-arsenic-antimony anomalies that
represent future drilling targets.
Macraes Goldfield
Underground exploration and resource infill drilling continued at the
Frasers Underground mine with 3,040 metres drilled and 16 diamond drill
holes completed. Drilling has confirmed mineralisation extends to the
north and north-east of the underground workings and the deposit
remains open in both directions. The underground exploration drive
advanced 146 metres during the quarter providing access down-dip for
step-out and infill underground drilling.
A three hole, 1,700 metre surface, drilling program to test for
mineralisation in between Frasers Underground Panels 1 and 2 commenced
in June. To date, 962 metres have been drilled with the program
scheduled for completion in early Q3.
A mapping program at the Frasers pit was completed during the quarter.
This program will be extended to Frasers Underground during Q3 2011 and
will assist with targeting potential underground extensions to the
mineralisation.
A follow-up soil sampling program (225 samples) on the Taieri permit
(EP40822) was completed and samples submitted for analysis. Assay
results are expected in Q3. The program which is located 15 kilometres
south of the Macraes processing plant, was designed to further define
two gold anomalies that were highlighted from the first pass soil
sampling on the Taieri permit.
Table A: Big River (Reefton) Drill Results
Hole ID From (m) To (m) Intercept (m) True Width Au (g/t)
(m)
BR0001 36 39 3 2.86
BR0002 NSA
BR0003 99.0 101.0 2.0 1.2 12.11
including 99.5 100.2 0.7 0.4 26.60
BR0004 127.0 147.0 20.0 15.1 8.08
BR0004 including 136.4 143.0 6.6 5.0 21.37
BR0004 including 137.4 138.2 0.8 0.6 71.50
BR0004 including 141.6 142.3 0.7 0.6 54.50
BR0005 112.1 117.1 5.0 4.0 3.18
including 112.1 114.9 2.8 2.2 3.25
including 116.1 117.1 1.0 0.8 6.63
BR0006 Results
Pending
BR0007 Results
Pending
NSA: No significant assay
results
Philippines
Exploration expenditure in the Philippines was $0.2 million for the
quarter.
Didipio
Activities continue to focus on granted regional tenements in the
vicinity of the Didipio Project in northern Luzon.
Regional geochemical sampling has identified a broad, low-level zone
Au-Cu-As anomaly to the north of the Didipio Project - the 'Mogambos'
prospect area. The Mogambos prospect has been geologically mapped and
grid soil sampled over an area of approximately 2.5km by 800m. Assay
results are expected in Q3 2011.
Low-level Au-Cu-As geochemical anomalies defined from earlier
geochemical surveys in the western (MMB area) and northern (Tadje area)
regions of the FTAA are currently being mapped and sampled in advance
of more detailed exploration activities planned in H2 2011.
Subsequent to quarter end, the Company appointed a Philippines based
Exploration Manager who will lead the exploration programs going
forward. Priorities for 2011 will remain within the Didipio FTAA with
exploration expected to re-commence in 2012 on some of the other
tenements held by the Company in Luzon and the throughout the Surigao
peninsula in northeastern Mindanao.
FINANCIAL SUMMARY
The table below provides selected financial data comparing Q2 2011 with
Q1 2011 and Q2 2010 together with the half year 2011 compared to the
half year 2010.
____________________________________________________________________
| | Q2 | Q1 | Q2 | Half Year | Half Year |
| | Jun 30 | Mar 31 |Jun 30 2010|Jun 30 2011|Jun 30 2010|
|STATEMENT OF | 2011 | 2011 | $'000 | $'000 | $'000 |
|OPERATIONS | $'000 | $'000 | | | |
|______________|________|________|___________|___________|___________|
|Gold sales | 94,805 | 90,746 | 80,218 | 185,551 | 128,517 |
|______________|________|________|___________|___________|___________|
|Cost of sales,|(56,417)|(44,065)| (37,560) | (100,482) | (72,924) |
|excluding | | | | | |
|depreciation | | | | | |
|and | | | | | |
|amortisation | | | | | |
|______________|________|________|___________|___________|___________|
|General & |(3,536) |(3,356) | (3,132) | (6,892) | (7,512) |
|Administration| | | | | |
|______________|________|________|___________|___________|___________|
|Foreign |(1,922) | 592 | 49 | (1,330) | (66) |
|Currency | | | | | |
|Exchange Gain/| | | | | |
|(Loss) | | | | | |
|______________|________|________|___________|___________|___________|
|Other income/ | 64 | 81 | (406) | 145 | (367) |
|(expense) | | | | | |
|______________|________|________|___________|___________|___________|
|Earnings | 32,994 | 43,998 | 39,169 | 76,992 | 47,648 |
|before | | | | | |
|interest, tax,| | | | | |
|depreciation &| | | | | |
|amortisation | | | | | |
|(EBITDA) | | | | | |
|(excluding | | | | | |
|gain/(loss) on| | | | | |
|undesignated | | | | | |
|hedges) | | | | | |
|______________|________|________|___________|___________|___________|
|Depreciation |(20,952)|(18,927)| (18,531) | (39,879) | (36,103) |
|and | | | | | |
|amortisation | | | | | |
|______________|________|________|___________|___________|___________|
|Net interest |(3,286) |(2,793) | (3,706) | (6,079) | (7,497) |
|expense | | | | | |
|______________|________|________|___________|___________|___________|
|Earnings/ | 8,756 | 22,278 | 16,932 | 31,034 | 4,048 |
|(loss) before | | | | | |
|income tax and| | | | | |
|gain/(loss) on| | | | | |
|undesignated | | | | | |
|hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Tax on |(4,609) |(7,506) | (8,964) | (12,115) | (5,627) |
|earnings / | | | | | |
|loss | | | | | |
|______________|________|________|___________|___________|___________|
|Earnings after| 4,147 | 14,772 | 7,968 | 18,919 | (1,579) |
|income tax and| | | | | |
|before gain/ | | | | | |
|(loss) on | | | | | |
|undesignated | | | | | |
|hedges | | | | | |
|______________|________|________|___________|___________|___________|
| | | | | | |
|______________|________|________|___________|___________|___________|
|Gain / (loss) | - | - | (14) | - | 16,216 |
|on fair value | | | | | |
|of | | | | | |
|undesignated | | | | | |
|hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Tax on | - | - | 4 | - | (4,865) |
|(gain)/loss on| | | | | |
|undesignated | | | | | |
|hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Net earnings/ | 4,147 | 14,772 | 7,958 | 18,919 | 9,772 |
|(loss) | | | | | |
|______________|________|________|___________|___________|___________|
| | | | | | |
|______________|________|________|___________|___________|___________|
|Basic earnings| $0.02 | $0.06 | $0.03 | $0.07 | $0.05 |
|per share | | | | | |
|______________|________|________|___________|___________|___________|
|Diluted | $0.02 | $0.06 | $0.03 | $0.07 | $0.05 |
|earnings per | | | | | |
|share | | | | | |
|______________|________|________|___________|___________|___________|
| | | | | | |
|______________|________|________|___________|___________|___________|
|CASH FLOWS | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows | 29,166 | 47,163 | (21,174) | 76,328 | (31,434) |
|from Operating| | | | | |
|Activities | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows |(32,008)|(29,353)| (21,236) | (61,361) | (39,330) |
|from Investing| | | | | |
|Activities | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows |(3,762) |(5,021) | (4,200) | (8,783) | 70,581 |
|from Financing| | | | | |
|Activities | | | | | |
|______________|________|________|___________|___________|___________|
__________________________________________________
| | As at | As at |
| |Jun 30 2011|Dec 31 2010|
|BALANCE SHEET | $'000 | $'000 |
|__________________________|___________|___________|
|Cash and cash equivalents | 193,176 | 181,328 |
|__________________________|___________|___________|
|Other Current Assets | 53,368 | 47,320 |
|__________________________|___________|___________|
|Non Current Assets | 539,409 | 477,568 |
|__________________________|___________|___________|
|Total Assets | 785,953 | 706,216 |
|__________________________|___________|___________|
|Current Liabilities | 65,718 | 63,091 |
|__________________________|___________|___________|
|Non Current Liabilities | 243,932 | 206,759 |
|__________________________|___________|___________|
|Total Liabilities | 309,650 | 269,850 |
|__________________________|___________|___________|
|Total Shareholders' Equity| 476,303 | 436,366 |
|__________________________|___________|___________|
RESULTS OF OPERATIONS
Net Earnings
The Company reported second quarter net earnings of $4.1 million, a
decrease when compared to $8.0 million in Q2 2010. This was also lower
than the Q1 result of $14.8 million and was attributable to higher unit
costs and lower production levels. Significant contributors to the
higher unit costs were the impact of a strengthening NZ dollar and a
reduced volume of capitalised stripping resulting in more expensed
waste being included in the cash costs compared to previous periods.
Total production of 61,988 oz was lower than the same period in 2010 and
below the Q1 2011 result of 65,671 ounces. Production was a reflection
of mining underperformance at the Frasers Underground mine and Reefton
Open Pit mine which resulted in a higher percentage of lower grade
stockpiles being processed and hence lower gold production.
The impact of non-cash charges for marked to market gains and losses on
hedges have in the past been significant. Consequently, EBITDA
(earnings before interest, tax, depreciation and amortisation excluding
gains/losses on undesignated hedges) and EBIT (earnings before interest
and tax before undesignated hedge gains/losses) have been highlighted
as measures of operational performance on a consistent and comparable
basis.
The Company reported EBITDA before gains/losses on undesignated hedges
of $33.0 million compared with $39.2 million in Q2 2010. This remains
a strong operating result and reflects higher gold revenue from
increased gold prices offset by lower production, increased costs and a
weakening USD.
The earnings for the quarter, excluding hedges, and before income tax
were a profit of $8.8 million compared to a Q1 2011 profit of $22.3
million.
Sales Revenue
Gold revenue in Q2 2011 of $94.8 million is a 4.5% increase over Q1 2011
due to higher gold prices received offset by a 5.3% decrease in sales
volumes. The average gold price received was $1,546 per ounce compared
to $1,401 in Q1 2011. In comparison the average gold price for Q2 2010
was $1,191 per ounce.
Gold sales volumes for Q2 2011 of 61,335 ounces were 5.3% lower than Q1
2011 (64,765 ounces).
Undesignated Hedges Gains/Losses
Undesignated hedge gains and losses calculated as a fair value
adjustment of the Company's undesignated hedges up to March 2010 had
previously been brought to account at the end of the reporting period,
and reflected changes in the spot gold price. This adjustment also
included entries made to take account of gold deliveries into the hedge
book as the derivative liability was released. These valuation
adjustments reflected a gain of $16.2 million attributable to Q1 2010
prior to close out of the hedge book.
Proceeds from an equity financing in March, 2010 were utilised to settle
all outstanding forward and call derivative instruments. The Company's
current policy is to be unhedged with all gold production sold into the
market at spot rates.
Operating Costs & Margins
Cash costs per ounce sold were $921 in Q2 2011, an increase of 34.1%
compared to Q1 2011 ($687). This increase relates to increased costs
for diesel, maintenance and a reduction in pre-strip excavated. When
compared to the prior period cash unit costs are also higher in USD
terms due to the strengthening of the NZD.
The cash margin of $625 per ounce, compared to $714 margin in Q1 2011
resulted in earnings before interest, tax, depreciation & amortisation
(excluding undesignated hedge gains/losses) of $33.0 million for the
quarter, compared to $44.0 million in Q1 2011.
Depreciation and Amortisation
Depreciation and amortisation charges are calculated on a unit of
production basis and total $21.0 million for the quarter. These
charges have increased on the previous quarter due to increased mining
costs and additional equipment leading to increased amortisation.
Depreciation and amortisation charges include amortisation of mine
development, deferred pre-stripping costs and depreciation on
equipment.
Net Interest expense
The net interest expense of $3.3 million compares to $2.8 million for Q1
2011 and reflects higher interest costs due to additional leased mining
equipment offset by the benefit of interest income from funds on
deposit. Interest expenses are associated with convertible notes and
finance leases.
DISCUSSION OF CASH FLOWS
Operating Activities
Cash inflows from operating activities were $29.2 million compared to
$47.2 million in Q1 2011. This compares to Q2 2010 cash outflow of
$21.2 million which was after payment of $56.7 million for settlement
of hedges. Cash flows have continued to benefit from higher gold
prices but offset by increased costs and an increase in inventory of
$6.3 million.
Investing Activities
Investing activities were comprised of expenditures for pre-strip mining
and sustaining capital at the New Zealand operations, plus capitalised
development costs associated with the construction of the Didipio
Project in the Philippines.
Cash used for investing activities totaled $32.0 million compared to
$29.4 million and $21.2 million in Q1 2011 and Q2 2010 respectively.
The expenditure reflects the acquisition of new equipment at the
Macraes Open Pit, Frasers Underground mine and land acquisitions along
with $13.5 million of capitalised pre-strip mining. Development costs
were $10.9 million for the Didipio Project in the quarter.
Financing Activities
Finance out flows were $3.8 million compared to cash out flows of $5.0
million in Q1 2011 and $4.2 million in Q2 2010. The out flow
represents predominantly lease payments. The comparative cash inflows
in H1 2010 include an equity placement in March ($80.1 million).
DISCUSSION OF FINANCIAL POSITION AND LIQUIDITY
Company's funding and capital requirements
For the quarter ended June 30, 2011, the Company earned a net profit of
$4.1 million. As at that date, cash funds held were $193.2 million.
Current liabilities were $65.7 million at period end. Cash flow
projections indicate sufficient funds will be available to meet all
operating obligations in the next twelve month period.
Commitments
There have been no material changes in the capital and operating lease
commitments as disclosed in the December 31 2011 audited financial
statements.
Additions to leases have in part been offset by payments on leases
OceanaGold's capital commitments as at June 30, 2011 are as follows:
June 30 2011
$'000
Within 1 year 19,659
This includes equipment for New Zealand operations and contracts
supporting the construction of the Didipio Project.
Financial position
Current Assets
Current assets have increased by $4.4 million since Q1 2011 primarily
due to an increase in inventory of $5.8 million due to additional parts
for owner mining at Reefton and the higher costs reflected in the ore
stockpiles. There was a small decrease other assets and prepayments.
Non-Current Assets
At June 2011 non-current assets were $539.4 million compared to $485.7
million at March 2011 under IFRS reporting. The expenditure on
Property, Plant and Equipment, Mining Assets and non-current
inventories was higher than depreciation and amortisation due to
additional leased equipment and an increase in pre-strip related
expenditure. Expenditure for Didipio Project was $10.9 million.
Current Liabilities
Current liabilities at June 2011 were $65.7 million compared to $64.4
million at March 31, 2011.
Non-Current Liabilities
Non-current liabilities are $243.9 million at June 30 2011, an increase
of $23.0 million since March 2011. This is due to an increase of $7.9
million in interest bearing loans, a $6.6 million increase in deferred
tax liabilities reflecting the utilisation of tax losses and an
increase in asset retirement obligations of $8.4 million.
Derivative Assets / Liabilities
For the period ended June 30, 2011 the company does not hold any
financial or gold sales contracts.
Shareholders' Equity
A summary of the movement in shareholders' equity is set out below:
Quarter Ended
June 30 2011
$'000
Total equity at beginning of financial period 442,452
Profit/(loss) after income tax 4,147
Movement in other comprehensive income 28,614
Movement in contributed surplus 705
Equity raising (net of costs) 385
Total equity at end of financial period 476,303
Shareholders' equity has increased $33.9 million to $476.3 million at
June 30 primarily as a result of a profit earned for the period, and
gains from currency translation differences reflected in Other
Comprehensive Income that arose from the translation of entities with a
functional currency other than USD.
Capital Resources
As at December 31, 2010, the share and securities summary was:
Shares outstanding 262,062,610
Options outstanding 5,645,153
As at June 30, 2011, the share and securities summary was:
Shares outstanding 262,590,386
Options outstanding 7,681,827
As at July 20, 2011, the share and securities summary was:
Shares outstanding 262,600,385
Options outstanding 7,671,828
As at July 28, 2011 no change in shares and securities.
CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING POLICIES
The preparation of financial statements in conformity with Canadian GAAP
requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and related
notes. The accounting policies that involve significant management
judgment and estimates are discussed in this section. For a list of the
significant accounting policies, reference should be made to Note 1 of
the June 30, 2011 unaudited interim consolidated financial statements
of OceanaGold Corporation.
Exploration and Evaluation Expenditure
Exploration and evaluation expenditure is stated at cost and is
accumulated in respect of each identifiable area of interest.
Such costs are only carried forward to the extent that they are expected
to be recouped through the successful development of the area of
interest (or alternatively by its sale), or where activities in the
area have not yet reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable resources,
and active work is continuing.
Accumulated costs in relation to an abandoned area are written off to
the Statement of Operations in the period in which the decision to
abandon the area is made.
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to
that area of interest.
Mining Properties in Production or Under Development
Expenditure relating to mining properties in production and development
are accumulated and brought to account at cost less accumulated
amortisation in respect of each identifiable area of interest.
Amortisation of capitalised costs, including the estimated future
capital costs over the life of the area of interest, is provided on the
production output basis, proportional to the depletion of the mineral
resource of each area of interest expected to be ultimately
economically recoverable.
Costs associated with the removal of overburden and other mine waste
materials that are incurred in the production phase of mining
operations are included in the costs of inventory in the period in
which they are incurred, except when the charges represent a betterment
to the mineral property. Charges represent a betterment to the mineral
property when the stripping activity provides access to reserves that
will be produced in future periods that would not have been accessible
without the stripping activity. When charges are deferred in relation
to a betterment, the charges are amortised over the reserve in the
betterment accessed by the stripping activity using the units of
production method.
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to
that area of interest. Should the carrying value of expenditure not
yet amortised exceed its estimated recoverable amount, the excess is
written off to the Statement of Income.
Asset Retirement Obligations
OceanaGold recognises the fair value of future asset retirement
obligations as a liability in the period in which it incurs a legal
obligation associated with the retirement of long-lived assets that
results from the acquisition, construction, development and/or normal
use of the assets. OceanaGold concurrently recognises a corresponding
increase in the carrying amount of the related long-lived asset that is
depreciated over the life of the asset.
The key assumptions on which the fair value of the asset retirement
obligations are based include the estimated future cash flow, the
timing of those cash flows and the credit-adjusted risk-free rate or
rates on which the estimated cash flows have been discounted.
Subsequent to the initial measurement, the liability is accreted over
time through periodic charges to earnings. The amount of the liability
is subject to re-measurement at each reporting period if there has been
a change to the key assumptions.
Asset Impairment Evaluations
The carrying values of exploration, evaluation, mining properties in
production or under development and plant and equipment are reviewed
for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable. If any such indication exists
and where the carrying value exceeds the discounted future cash flows
from these assets, the assets are written down to the fair value of the
estimated future cash flows based on OceanaGold's discount rate for the
asset.
Derivative Financial Instruments /Hedge Accounting
The consolidated entity has used derivative financial instruments to
manage commodity price and foreign currency exposures from time to
time. Derivative financial instruments are initially recognised in the
balance sheet at fair value and are subsequently re-measured at their
fair values at each reporting date.
The fair value of gold hedging instruments is calculated by discounting
the future value of the hedge contract at the appropriate prevailing
quoted market rates at the reporting date. The fair value of forward
exchange contracts is calculated by reference to the current forward
exchange rate for contracts with similar maturity profiles.
Stock Option Pricing Model
Stock options granted to employees or external parties are measured by
reference to the fair value at grant date and are recognised as an
expense in equal installments over the vesting period and credited to
the contributed surplus account. The expense is determined using an
option pricing model that takes into account the exercise price, the
term of the option, the impact of dilution, the non-tradable nature of
the option, the current price and expected volatility of the underlying
share, the expected dividend yield and the risk free interest rate for
the term of the option.
Income Tax
The Group follows the liability method of income tax allocation. Under
this method, future tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the substantially enacted tax rates
and laws that will be in effect when the differences are expected to
reverse. Deferred tax assets including tax losses are recognised to the
extent that it is probable that the company will generate future
taxable income. Utilisation of the tax losses also depends on the
ability of the entities to satisfy certain tests at the time the losses
are recouped.
Foreign Currency Translation
The consolidated financial statements are expressed in United States
dollars ('USD') and have been translated to USD using the current rate
method described below. The controlled entities of OceanaGold have
either Australian dollars ('AUD'), New Zealand dollars ('NZD') or
United States dollars ('USD') as their functional currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Generally, foreign exchange gains and losses resulting
from the settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an operation's
functional currency are recognised in the statement of income.
ACCOUNTING ESTIMATES
Significant areas where management's judgment is applied include ore
reserve and resource determinations, exploration and evaluation assets,
mine development costs, plant and equipment lives, contingent
liabilities, current tax provisions and future tax balances and asset
retirement obligations. Actual results may differ from those
estimates.
RISKS AND UNCERTAINTIES
This document contains some forward looking statements that involve
risks, uncertainties and other factors that could cause actual results,
performance, prospects and opportunities to differ materially from
those expressed or implied by those forward looking statements. Factors
that could cause actual results or events to differ materially from
current expectations include, among other things: volatility and
sensitivity to market prices for gold; replacement of reserves;
procurement of required capital equipment and operating parts and
supplies; equipment failures; unexpected geological conditions;
political risks arising from operating in certain developing countries;
inability to enforce legal rights; defects in title; imprecision in
reserve estimates; success of future exploration and development
initiatives; operating performance of current operations; ability to
secure long term financing and capital, water management, environmental
and safety risks; seismic activity, weather and other natural
phenomena; failure to obtain necessary permits and approvals from
government authorities; changes in government regulations and policies
including tax and trade laws and policies; ability to maintain and
further improve labour relations and other development and operating
risks.
For further detail and discussion of risks and uncertainties refer to
the Annual Information Form available on the Company's website.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
Adoption of new accounting policies
International Financial Reporting Standards ('IFRS')
With effect from January 1, 2011 the Company adopted IFRS. The balance
sheet was converted as at January 1, 2010 to establish opening balances
to support the comparative information as at and for the period ended
December 31, 2010 included in the 2011 financial statements. The
impact of the adoption and reporting of IFRS is disclosed in the June
30, 2011 unaudited interim consolidated financial statements.
Accounting policies effective for future periods
IFRS 1 - 'Exemption for severe hyperinflation and removal of fixed dates'
Amended to create additional exemptions (i) for when an entity that has
been subject to severe hyperinflation resumes presenting or presents
for the first time, financial statements in accordance with IFRS, and
(ii) to eliminate references to fixed dates for one exception and one
exemption, both dealing with financial assets and liabilities.
Effective for annual periods beginning on or after July 1, 2011. Not
expected to have an impact on the Company as IFRS adopted January 1,
2011.
IFRS 7 - 'Financial instruments' - disclosures
Amended to require additional disclosures in respect of risk exposures
arising from transferred financial assets. Effective for annual periods
beginning on/after July 1, 2011. Not expected to have a material effect
on the Company.
IAS12 - 'Deferred tax accounting for investment property at fair value'
Amended to introduce an exception to the existing principle for the
measurement of deferred tax assets or liabilities arising on investment
property measured at fair value. Effective for annual periods beginning
on or after January 1, 2012. Not expected to have an impact on the
Company as there are no investment properties.
IFRS 9 - 'Financial instruments - classification and measurement'
This is the first part of a new standard on classification and
measurement of financial assets that will replace IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 has two measurement categories: amortised cost and fair value.
All equity instruments are measured at fair value. A debt instrument is
at amortised cost only if the entity is holding it to collect
contractual cash flows and the cash flows represent principal and
interest. Otherwise it is at fair value through profit or loss.
Effective for years beginning on/after January 1, 2013.
IFRS 9 - 'Financial instruments - classification and measurement'
Updated to include guidance on financial liabilities and derecognition
of financial instruments. Effective for years beginning on/after
January 1, 2013. The company has not assessed the impact of this new
stanadard.
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited information for each of the
eight quarters ended September 30, 2009 through to June 30, 2011. This
information has been derived from our unaudited consolidated financial
statements which, in the opinion of management, have been prepared on a
basis consistent with the audited consolidated financial statements and
include all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of our financial position
and results of operations for those periods. On adoption to IFRS there
were no material differences to the income statements and management
believe the results are comparable as they were prepared on a
consistent basis.
. Jun 30 Mar 31 Dec 31 Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
2011 2011 2010 2010 2010 2010 2009 2009
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Gold sales 94,805 90,746 93,777 83,344 80,218 48,299 66,849 59,928
EBITDA 32,994 43,998 49,259 42,608 39,169 8,479 28,237 24,425
(excluding
undesignated
gain/(loss)
on hedges)
Earnings/ 3,697 14,772 20,655 13,683 7,968 (9,547) (4,151) 1,859
(loss) after
income tax
and before
undesignated
gain/(loss)
on hedges
(net of tax)
Net earnings/ 4,147 14,772 20,979 13,683 7,958 1,814 (8,456) 13,800
(loss)
Net earnings
per share
Basic $0.02 $0.06 $0.08 $0.06 $0.03 $0.01 ($0.05) $0.08
Diluted $0.02 $0.06 $0.08 $0.06 $0.03 $0.01 ($0.05) $0.07
The most significant factors causing variation in the results are the
variability in the grade of ore mined from the Macraes and Reefton open
pit mines and variability of cash cost of sales due to the timing of
waste stripping activities. The volatility of the gold price has a
significant impact both in terms of its influence upon gold revenue and
returns. Adding to the variation are large movements in foreign
exchange rates between the USD and the NZD.
NON-GAAP MEASURES
Throughout this document, we have provided measures prepared according
to IFRS ('GAAP'), as well as some non-GAAP performance measures. As
non-GAAP performance measures do not have a standardised meaning
prescribed by GAAP, they are unlikely to be comparable to similar
measures presented by other companies.
We provide these non-GAAP measures as they are used by some investors to
evaluate OceanaGold's performance. Accordingly, such non-GAAP measures
are intended to provide additional information and should not be
considered in isolation, or a substitute for measures of performance in
accordance with GAAP.
Earnings before interest, tax, depreciation and amortisation (EBITDA) is
one such non-GAAP measure and a reconciliation of this measure to net
earnings/(losses) is provided on page 12.
Cash and non cash costs per ounce are other such non-GAAP measures and a
reconciliation of these measures to cost of sales, including
depreciation and amortisation, is provided on the next page.
Q2 Q1 Q2 Half year Half year
Jun 30 2011 Mar 31 2011 Jun 30 2010 Ended Jun Ended Jun
$'000 $'000 $'000 30 2011 30 2010
$'000 $'000
Cost of sales, 56,417 44,065 37,560 100,482 72,924
excluding
depreciation
and
amortisation
Depreciation 20,952 18,927 18,531 39,879 36,103
and
amortisation
Total cost of 77,369 62,992 56,091 140,361 109,027
sales
Add sundry 78 414 428 492 875
general &
administration
Add non cash & 471 267 117 738 176
selling costs
Total 77,918 63,673 56,636 141,591 110,078
operating cost
of sales
Gold Sales 61,335 64,765 67,347 126,100 132,388
from operating
mines (ounces)
Total 1,270 983 841 1,123 831
Operating Cost
($/ ounce)
Less Non-Cash 349 296 277 322 274
Cost ($/
ounce)
Cash Operating 921 687 564 801 557
Cost ($/
ounce)
ADDITIONAL INFORMATION
Additional information referring to the Company, including the Company's
Annual Information Form, is available on SEDAR at www.sedar.com and the Company's website at www.oceanagold.com.
DISCLOSURE CONTROLS AND PROCEDURES
The Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of the Company's disclosure controls and procedures as at
June 30, 2011. Based on that evaluation, the Chief Executive Officer
and the Chief Financial Officer concluded that the design and operation
of these disclosure controls and procedures were effective as at June
30, 2011 to provide reasonable assurance that material information
relating to the Company, including its consolidated subsidiaries, would
be made known to them by others within those entities.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of OceanaGold, including the Chief Executive Officer and
Chief Financial Officer, have evaluated the effectiveness of the design
and operation of the Company's of the internal controls over financial
reporting and disclosure controls and procedures as of June 30, 2011.
Based on this evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that they were effective at a
reasonable assurance level.
There were no significant changes in the Company's internal controls, or
in other factors that could significantly affect those controls
subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed their evaluation, nor were there any significant
deficiencies or material weaknesses in the Company's internal controls
requiring corrective actions.
The Company's management, including the Chief Executive Officer and the
Chief Financial Officer does not expect that its disclosure controls
and internal controls over financial reporting will prevent all errors
and fraud. A cost effective system of internal controls, no matter how
well conceived or operated, can provide only reasonable not absolute,
assurance that the objectives of the internal controls over financial
reporting are achieved
Full Company Release
To view the full company release, including images please refer to the
company's website www.oceanagold.com
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/July2011/28/c8015.html
Ms Nova Young
Investor Relations Officer
Tel: 61(3) 9656 5300
or
Mr Darren Klinck
Head of Business Development
Tel: 1 604 637 1337