Top Kiwi gold producer completes de-hedgingNew Zealand's major...

Top Kiwi gold producer completes de-hedging
New Zealand's major South Island gold producer OceanaGold is now free of a feral hedge book that has curbed its profit line in recent years when the gold price rose and the return in Kiwi dollars made the spot price the best ever in New Zealand's history.

Author: Ross Louthean
Posted: Tuesday , 30 Mar 2010

PERTH -

In recent months OceanaGold Corporation (TSX, ASX & NZX: OGC) has undertakeb major capital raisings in Canada and Australia to clear a hedge book that would have been wound down by next year, but on a hedge price of less than $NZ800/ounce ($US568.50/oz) that has impacted the profit line for the Macraes gold operations.

There were no hedge positions in place for the company's second mining centre - the Globe-Progress mine in the Reefton goldfield on the South Island's West Coast.

Clearing the hedge book to be totally a spot gold price producer, and the record production in 2009 of 300,044 ounces and a strong growth in resource and reserve inventory at Macraes from intensified exploration have been the primers for a strong rise in Oceana's share price on all three bourses. This month the Macraes operation poured its three millionth oz.

Early in 2009 OceanaGold was looking unappealing, having been forced to mothball its new Didipio gold-copper project in the Philippines, and carrying a hedge book that largely negated the profit line from the balance of spot-price related production.

A report today in the Melbourne Age newspaper said Oceana can now generate about A$2 million (US$1.83 million) per week in cash flow providing the gold price remains around US$1,100 an ounce (NZ$1,4008 /oz).

In the past two years NZ gold miners have basked in a gold price of up to $NZ1,800/oz but Oceana was saddled with a hedge book that some analysts considered a millstone - where it had sold forward up to one-third of production from Macraes.

However, Oceana's chief operating officer Mark Cadzow reportedly told the Melbourne Age: "Oceana is now in a position to present itself as an unhedged gold producer, and a significant one at that, at a time when gold is pretty strong and people are still looking for a safe haven."

Cadzow also reportedly said that several companies had expressed interest in a joint venture on Didipio but no move would be made until Oceana has completed an evaluation on the project.