Favourable currency exchange rate moves and lower oil prices have prompted OceanaGold to extend mining operations at the Macraes Gold Project in the East Otago area by three to five years. Macraes was scheduled to wind up in the next two years.
OceanaGold’s managing director and CEO Mick Wilkes said the fall in the oil price would save the company around $15 million a year between New Zealand and the Didipio operation in the Philippines. He said the company had also benefited from the higher US dollar and lower NZ dollar.
“10 cents per litre fall in the diesel price equates to a $10 per ounce fall in New Zealand AISC margin. Plus a 1 cent fall in the New Zealand exchange rate equates to a fall in operating costs of $15 per ounce for our NZ business. Last year the New Zealand exchange rate averaged US$0.83 and this year US$0.75 – so that means operating costs benefit by $120 per ounce plus the savings from the lower diesel price. There are significant tail winds for us in New Zealand at present,” he said.
“We’ve also had exploration success both at surface and underground,” he said. “The underground is higher grade and that exploration will allow it to continue for another year.
“On surface we’re looking for more resources, albeit low grade, between the pits we’ve mined over the last 24 years. It has a low strip ratio and we believe we can mine the open pits for many more years.
“At Macraes, we’ll be mining for 3-5 years at 150,000 ounces per year from the open pit and underground which is a similar production level to today.
“As announced, Reefton will go on care and maintenance at the end of this year. The nature of the ore body means it will be difficult to mine the underground and an extension of the open pit would require a higher gold price. Notwithstanding, there is plenty of exploration potential and we will keep the plant in working order.
“Blackwater is close by and we conducted a successful scoping study on that last year. We will evaluate different mining options this year to reduce the project risk. It is a project that could be brought into production at a relatively low cost.
“The other growth opportunity in New Zealand is the gold with tungsten by-product project called Round Hill, near Macraes. We may reinvent Macraes as a gold/tungsten project as there are quite significant amounts of tungsten there.
“We’re well advanced on the flow sheet and will conduct a scoping study shortly. Macraes could go for an additional 10-12 years after the current plant closes down. That’s exciting and we’re in discussions with several tungsten off-takers. We’re encouraged by those discussions.”