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Lacklustre price no obstacle to plans

Lacklustre price no obstacle to plans

Never mind that the global gold-price seems to be running round in little circles, mid-sized New Zealand multinational OceanaGold is bent on scraping yet another cache of the precious stuff out of the fabled Martha Pit mine in the main street of Waihi, in the Bay of Plenty.

OceanaGold, which bought the Martha Pit from global giant Newmont Mining Corporation in late 2015, announced in March this year that it was going to drive another underground mine expected to yield 75,000 ounces over 10 years.

The pit was still being worked opencast until April of 2015 when a succession of slips on the north wall began to block the spiralling access tracks. Output has been limited by them since.

The company has dubbed the new initiative Project Martha, referring both to the new underground drive and the rehabilitation of the pit itself into full production. It’s expected to ensure an average of 350 full-time jobs, peaking at 420, throughout its lifetime.

The announcement comes at a time when the outlook for OceanaGold is upbeat, though the same cannot necessarily be said for the metal itself.

At $US1301 an ounce ($NZ1807/oz) in early May, it was at its lowest point since last December, and was behaving confusedly.

The US Federal Reserve’s strengthening support for the greenback has put pressure on gold prices predictably enough, but there’s a powerful smell of global protectionism which should be more than compensating for the dollar, but isn’t – at least, not yet.

The looming trade war between the US and China should be sending everyone rushing for the safe haven of gold, but they’re not – at least, not yet.

Over the short term though, the gold price is undoubtedly firming slowly, though the 200-day moving average was exactly the price in the first week of May. More revealing is the 100-day moving average, which is a healthier $US1321/oz ($NZ1835/oz).

Whichever direction the market ends up heading in, or even if it continues to stay put, OceanaGold is in an excellent heart to survive and thrive.

It moved into a new league among global companies, from minnow to mid-sized, when it cracked the half-million ounce production mark in calendar 2017 for the first time – with 50,000oz to spare.

This was despite the core operation at Macraes in East Otago running into a low-return area, and the new Haile mine in South Carolina, bought by OceanaGold for $US380 million ($NZ527m), yet to get into production.

OceanaGold’s most profitable mine is the Didipio open pit on the northern Philippines island of Luzon, where copper as a by-product goes a long way towards offseting production costs.

The Didipio operation is threatened by an opencast mining ban imposed by an environmentalist minister in the Philippines Government of President Rodrigo Duterte, though there are indications that could be lifted by the end of this year.

To the degree that the last 12 months have proved a breakthrough year for Oceana productionwise, investors in the listed miner have yet to be impressed, letting the share price over the first half of the year gyrate between a high of $4.88 and a low of $3.08.

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