oversold?, page-15

Citi Report:

OceanaGold (OGC.AX)

Didipio Downside: There�s None Left

 Didipio Fears Overdone � OGC has sold off by ~30% YTD in 2011, the worst
performing stock in our gold coverage universe. This has been driven by weaker
sentiment for gold, but also on the back of a 17-Jan Reuters� article which reported
Commission on Human Rights of the Philippines (CHR) allegations of violations to
indigenous people�s rights by OGC in 2008/2009. We do not anticipate this will place
OGC�s mining rights in jeopardy, with the company adamant that it has, and will
continue to, conduct development activities appropriately. While it may be several
weeks until the Filipino Government is able to provide a formal response to the
allegations, investors with a medium to long-term investment horizon should take
advantage of the short-term volatility, with current levels offering compelling valuation
support in our view.

 Compelling Valuation Support � Even if we attribute nil value for Didipio in our NPV
($1.00/share on our base case estimates), OGC still trades on ~1.15x NPV. This
represents very attractive value for a mid-cap gold stock which we think should typically
trade on 1.3-1.5x NPV. On our base case estimates (including Didipio), OGC�s current
P/NPV of ~0.8x represents the cheapest across our gold coverage universe and
undeniable valuation support.

 What's in the Price � In order to derive an NPV which would see OGC trade on what
we�d consider to be a �fair� value P/NPV range of 1.3-1.5x, we would have to factor in
not only nil value for Didipio, but also a 10% increase in cash costs at the NZ
operations. We think that an outcome such as this is highly improbable.

 4Q Production OK � 4Q production of 68koz at a cash cost of US$596/oz was short of
our 74koz at US$600/oz, however within the full-year guidance range.

 Reiterate Buy / $5.00 Target Price � OGC�s valuation support and material upside to
our target price offers investors an attractive proposition at current levels. In our view,
the market has significantly mis-priced what we see as limited downside risk. Buying a
mid-cap gold stock on sub <1x P/NPV represents a rare opportunity in our view.