somethings up?, page-6

Event:
* We are initiating coverage of OceanaGold Corporation (OGC) with a BUY recommendation.

Key Take-Outs:
* OceanaGold (OGC) is listed on the Australian, New Zealand and Toronto stock exchanges and currently has two major projects in its portfolio.

* The Macraes Gold Project includes open pit mining from Macraes Open Pit and the Reefton Underground Mine (at separate locations), as well as underground mining from the Frasers Underground Mine (at Macraes). All of the ore sourced from these operations is fed to the Macraes processing facility (which includes an autoclave for refractory ore).

* We estimate the Macraes facility will produce ~300koz Au in FY11, at an average cost of ~US$600/oz (including royalties).

* Didipio in the Philippines has been on care and maintenance following the onset of the GFC during its construction in 2008. Bulk earthworks are complete and long lead items have previously been purchased and are in storage. OGC has reactivated to construction on this project, which requires a further ~US$140m capital for completion.

* Didipio should be commissioned during FY12, with the first full year of production in FY13. At steady state, the project should produce ~60koz Au and 15kt Cu from an open pit mine which, after five to six years, will transition to underground. Cash costs (net of by products) should average less that US%220/oz throughout the 20-year planned mine life.

* We view both the New Zealand and Philippines exploration tenements favourably, with potential upside through upgrades to existing resources and additions of new resources.

* As it stands, the Didipio project should be fully funded given the recent capital raising and the cash flow generated by the existing New Zealand operations.

Earnings and Valuation Impact:
* Our valuation ranges from a base of $3.90/share to an upside valuation of $6.75/share, which includes maintaining mill capacity at Didipio at 2.5mtpa (instead of reducing to 1.2mtpa once the open pit finishes). Our earnings forecast for FY11 is US$68m.

Investment View:
* We are initiating coverage with a BUY recommendation and a 12-month price target of $5.00.

* OGC has existing production with volume growth and optionality through the development of the Didipio project.

* The key risk, in our view is the construction of the Didipio project in the Philippines. Whilst we are reasonably comfortable with the sovereign risk aspects, we see the project management and timeframe of the construction as the bigger threats.