I have sent the following comments to OceanaGold. It may be time...

I have sent the following comments to OceanaGold. It may be time for shareholders to give management some positive ideas.

OceanaGold Corporation May 11, 2011
Board of Directors

Dear Sir

I ask that the Board consider establishing a dividend policy in order that shareholders can benefit in a meaningful way from the very substantial cash flows presently being generated by the New Zealand mines. Dividends could be based on the price of gold, and so not detract from capital commitments to build Didipio. Dividends could be established that would pay all income over an average price of U.S.$1500 per ounce received each quarter out to shareholders as dividends. On this basis, every U.S.$100 increase in the price of gold over $1500 would see shareholders receive over U.S. $.10 per share in dividends. Even with this dividend policy, OceanaGold should be able to increase cash balances as Didipio is built, as shown by the following cash flow projection in U.S. dollars

Production 270,000 ounces
Selling Price $1500 per ounce
Cash Costs $700 per ounce
Gross Cash Margin $216 million

Less Following Outflows

Administration $14 million
Net Interest $11 million
Capital Spending $70 million
N.Z.
Exploration $10 million
Debt Repayment $20 million
Total $125 million

Cash surplus $91 million

Total cash surplus over
Two years to build
Didipio $182 million

Less cost to build
Didipio $140 million
Cash Surplus $42 million
Cash March 31,2011 $183 million
Cash March 31,2013 $235 million

I note that the Board is requesting a substantial increase in remuneration, and while I believe that performance should be paid for, I do not believe that the Board has demonstrated the ability to make intelligent decisions that increase shareholder value. I note that over the last few years the price of gold has tripled in value from U.S. $500 to $1500 per ounce with production increasing from 180,000 to 270,000 ounces per year. While this combination has increased gross cash flows from the N.Z. mines by about 600% (allowing for higher cash costs), the share price has collapsed from AUS $4.00 to AUS $2.40. It is a poor reflection on the Board that they could actually destroy shareholder value during a time when operating fundamentals have increased by such a substantial amount.

Finally, as a short term measure, the Board should consider a limited buy-back of company stock. Purchases of up to U.S. $5 million per month at prices under AUS $3.00 would reduce the excessive share dilution of the past. This policy combined with a dividend policy would be very beneficial to the share price.

With Didipio built and a gold price in excess of U.S. $2000 per ounce, OceanaGold should be generating gross cash flows in excess of U.S. $500 million per year with a market capitalisation of U.S. $4 billion. The Board should make decisions that reflect this potential.