MELBOURNE, Australia, Oct. 28 /CNW/ -- /NOT FOR DISSEMINATION OR
DISTRIBUTION IN THE UNITED STATES OR TO US PERSONS AND NOT FOR
DISTRIBUTION TO US NEWSWIRE SERVICE/ MELBOURNE, Australia, Oct. 28
/CNW/ - OceanaGold Corporation (ASX: OGC, TSX: OGC, NZX: OGC) (the
"Company") has recorded strong quarter on quarter growth with a 72%
increase in net earnings of $13.7 million and at $42.6 million, a
9% improvement in EBITDA over the previous quarter. Gold production
for the quarter totalled 68,763 ounces, realising a YTD total of
201,595 ounces. OceanaGold is Australia's third largest ASX
listed gold producer. The quarter also saw the Company successfully
close a C$115.5 million equity raising to complete development of
its highly prospective Didipio Project in the Philippines.
Key personnel appointments related to Didipio's development were
made during the period, including a Project Director - Philippines
who will oversee all aspects of construction and project
management.
Executive
Chairman, Jim Askew, said "OceanaGold's third quarter results
demonstrated higher cash operating margins and solid cash flows
from our NZ operations. With the commencement of the development of
the Didipio Project the company will be well positioned for ongoing
earnings growth and expansion". "Didipio represents a
long life mine with robust economics that, after allowing for
copper by-product credits, will create a cash cost profile that
aims to put the Company within the lowest quartile amongst its peer
group," he said. "Integrating Didipio into the stable of well
managed mines that already exist in New Zealand will be
OceanaGold's priority in the months ahead and is expected to result
in significant profitability gains for the Company."
Other highlights from the 2010
Third Quarter Report include: -- Improved mining and milling rates
at the Macraes open cut and Frasers underground operations
resulting in a 20% increase in production when compared to the
previous quarter. -- A New Zealand exploration program added 3,600
metres of underground drilling completed at Frasers Underground
(Macraes) and 7,600 metres of drilling at Globe Deeps (Reefton).
About OceanaGold OceanaGold Corporation is
a significant Pacific Rim gold producer with projects located on
the South Island of New Zealand and in the Philippines. The
Company's assets encompass New Zealand's largest gold mining
operation at the Macraes goldfield in Otago which is made up of the
Macraes open pit and the Frasers Underground mines. Additionally on
the west coast of the South Island, the Company operates the
Reefton open-pit mine. OceanaGold produces between 270,000 -
290,000 ounces of gold per annum from the New Zealand operations.
The Company also owns the Didipio Project in northern Luzon,
Philippines where construction is scheduled to re-commence in H1
2011. OceanaGold is listed on the Toronto, Australian and New
Zealand stock exchanges under the symbol OGC. Cautionary
Statement Statements in this release may be forward-looking
statements or forward-looking information within the meaning of
applicable securities laws. Any statements that express or involve
discussions with respect to predictions, expectations, beliefs,
plans, projections, objectives, assumptions or future events or
performance (often, but not always, using words or phrases such as
"expects" or "does not expect", "is expected", "anticipates" or
"does not anticipate", "plans", "estimates" or "intends", or
stating that certain actions, events or results "may", "could",
"would", "might" or "will" be taken, occur or be achieved) are not
statements of historical fact and may be forward-looking
statements. Forward-looking statements are subject to a variety of
risks and uncertainties which could cause actual events or results
to differ from those reflected in the forward-looking statements
including, among others, the accuracy of mineral reserve and
resource estimates and related assumptions, inherent operating
risks and those risk factors identified in the Company's Annual
Information Form prepared and filed with securities regulators in
respect of its most recently completed financial year. There are no
assurances the Company can fulfil such forward-looking statements
and, subject to applicable securities laws, the Company undertakes
no obligation to update such statements. Such forward-looking
statements are only predictions based on current information
available to management as of the date that such predictions are
made; actual events or results may differ materially as a result of
risks facing the Company, some of which are beyond the Company's
control. Accordingly, readers should not place undue reliance
on forward-looking statements. It is also noted that mineral
resources that are not mineral reserves do not have demonstrated
economic viability. Management's Discussion and Analysis of
Financial Condition and Results of Operations for the Quarter Ended
September 30, 2010 Cautionary Statement Regarding Forward-Looking
Information This Management Discussion & Analysis contains
"forward-looking statements and information" within the meaning of
applicable securities laws which may include, but is not limited
to, statements with respect to the future financial and operating
performance of the Company, its subsidiaries and affiliated
companies, its mining projects, the future price of gold, the
settlement and cancellation of the Company's hedging facilities,
the early redemption of the Company's convertible notes, the
estimation of mineral reserves and mineral resources, the
realisation of mineral reserve and resource estimates, costs of
production, estimates of initial capital, sustaining capital,
operating and exploration expenditures, costs and timing of the
development of new deposits, costs and timing of the development of
new mines, costs and timing of future exploration, requirements for
additional capital, governmental regulation of mining operations
and exploration operations, timing and receipt of approvals,
consents and permits under applicable mineral legislation,
environmental risks, title disputes or claims, limitations of
insurance coverage and the timing and possible outcome of pending
litigation and regulatory matters. Often, but not always,
forward-looking statements and information can be identified by the
use of words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "targets",
"aims", "anticipates" or "believes" or variations (including
negative variations) of such words and phrases, or may be
identified by statements to the effect that certain actions, events
or results "may", "could", "would", "should", "might" or "will" be
taken, occur or be achieved. Forward-looking statements and
information involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Company and/or its subsidiaries and/or its
affiliated companies to be materially different from any future
results, performance or achievements expressed or implied by the
forward-looking statements. Such factors include, among others,
future prices of gold; general business, economic, competitive,
political and social uncertainties; the actual results of current
production, development and/or exploration activities; conclusions
of economic evaluations and studies; fluctuations in the value of
the United States dollar relative to the Canadian dollar, the
Australian dollar, the Philippines Peso or the New Zealand dollar;
changes in project parameters as plans continue to be refined;
possible variations of ore grade or recovery rates; failure of
plant, equipment or processes to operate as anticipated; accidents,
labour disputes and other risks of the mining industry; political
instability or insurrection or war; labour force availability and
turnover; delays in obtaining financing or governmental approvals
or in the completion of development or construction activities or
in the commencement of operations; as well as those factors
discussed in the section entitled "Risk Factors" contained in the
Company's Annual Information Form in respect of its fiscal
year-ended December 31, 2009, which is available on SEDAR at
www.sedar.com under the Company's name. Although the Company has
attempted to identify important factors that could cause actual
actions, events or results to differ materially from those
described in forward-looking statements and information, there may
be other factors that cause actions, events or results to differ
from those anticipated, estimated or intended. Also, many of the
factors are outside or beyond the control of the Company, its
officers, employees, agents or associates. Forward-looking
statements and information contained herein are made as of the date
of this Management Discussion & Analysis and, subject to
applicable securities laws, the Company disclaims any obligation to
update any forward-looking statements and information, whether as a
result of new information, future events or results or otherwise.
There can be no assurance that forward-looking statements and
information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements and information due to the inherent
uncertainty therein. All forward-looking statements and information
made herein are qualified by this cautionary statement. This
Management Discussion & Analysis may use the terms "Measured",
"Indicated" and "Inferred" Resources. U.S. investors are advised
that while such terms are recognised and required by Canadian
regulations, the Securities and Exchange Commission does not
recognise them. "Inferred Resources" have a great amount of
uncertainty as to their existence and as to their economic and
legal feasibility. It cannot be assumed that all or any part of an
Inferred Resources will ever be upgraded to a higher category.
Under Canadian rules, estimates of Inferred Resources may not form
the basis of feasibility or other economic studies. U.S. investors
are cautioned not to assume that all or any part of Measured or
Indicated Resources will ever be converted into reserves. U.S.
investors are also cautioned not to assume that all or any part of
an Inferred Resource exists, or is economically or legally
mineable. This document does not constitute an offer of securities
for sale in the United States or to any person that is, or is
acting for the account or benefit of, any U.S. person (as defined
in Regulation S under the United States Securities Act of 1933, as
amended (the "Securities Act")) ("U.S. Person"), or in any other
jurisdiction in which such an offer would be illegal. The
securities have not been and will not be registered under the
Securities Act, and may not be offered or sold in the United States
or to, or for the account or benefit of, U.S. Persons unless the
securities are registered under the Securities Act or an exemption
from the registration requirements of the Securities Act is
available. The securities may be offered and sold solely in
"offshore transactions" in reliance on Regulation S under the
Securities Act. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Quarter Ended September
30, 2010 HIGHLIGHTS -- Sold 67,672 ounces of gold during the
quarter, bringing the YTD total to 200,060 ounces -- Reported net
earnings after income tax of $13.7 million for the third quarter --
EBITDA (earnings before interest, taxes, depreciation and
amortisation) was $42.6 million for the third quarter* -- Announced
the successful closing of a C$115.5 million equity raising on
October 20, 2010 -- Announced the results of the re-optimisation
study for the Didipio gold-copper project in the Philippines --
Appointment of Project Director - Philippines All statistics are
compared to the corresponding 2009 period unless otherwise stated.
OceanaGold has adopted USD as its presentation currency and all
numbers in this document are expressed in USD unless otherwise
stated. * EBITDA is a non GAAP measure. Refer to page 19 for
explanation of non GAAP measures. OVERVIEW Results from Operations
OceanaGold recorded quarterly gold sales for Q3 2010 of 67,672
ounces at cash costs of $568 per ounce. Sales for the year to date
ended September 30 were 200,060 ounces at an average cash cost of
$561 per ounce. Although sales for the quarter slightly exceeded
the previous period, unusually wet conditions at Reefton hampered
mining rates and access to higher grade ore in the open pits with
total ounces sold being slightly lower than plan. Both the Macraes
open cut and Frasers underground operations showed strong
improvements over the previous quarter. Mining and milling rates
were both stronger, resulting in higher grade ore processed through
the mill and a 20% increase in production when compared to Q2. The
strong performance at Macraes and Frasers offset some of the
weather related challenges encountered at Reefton and demonstrated
once again the benefit of having multiple operations. Cash costs
for the quarter of $568/oz brought the cash costs year to date to
$561/oz. Lower ounces from Reefton negatively affected unit cash
costs for the quarter but the main contributor to higher costs has
been the weakening U.S. dollar and stronger NZ$ denominated input
costs. Cash operating margins continue to expand quarter on quarter
as a result of the higher spot gold price and the unhedged
position. Operating margins rose 6% over the previous quarter but
were up 82% when compared to the same period last year,
predominantly as a result of all gold production now being sold at
spot compared to 2009 when approximately, one third of production
was delivered and sold into an "out of the money" hedgebook. EBITDA
was up 9% on the previous quarter due to higher spot gold prices
received, at $42.6 million. Didipio Gold - Copper Project The
Didipio Gold and Copper project in Luzon province, Philippines
remained under care and maintenance during the quarter with a small
workforce at the project site. The Company announced in September
the completion of the internal economic and technical
re-optimisation study for the project. The new study addresses a
review of mining method, scheduling, process plant layout and
infrastructure requirements and associated capital costs to
recommence construction and complete the project. Subsequent to the
quarter end, a Project Director was appointed to oversee all
aspects of construction and project management for the project.
Additionally, on October 5(th), the Company announced a C$115.5
million bought deal private placement financing with the majority
of the proceeds to be allocated towards completion of construction
of the Didipio project. FY 2010 Production Guidance Production
guidance of 270,000 - 290,000 ounces is maintained with the
expectation for FY2010 production to fall in the lower end of the
range. Cash cost guidance of US$455 - US$495 per ounce has been
increased to US$555 - US$585 per ounce due to the weakening US
Dollar (US$). Costs in NZ$ remain relatively stable. Cash operating
margins continue to be strong and increased to $664 in Q3. - Table
1 - Key Financial and Operating Statistics
_________________________________________________________________
|Financial | Q3 | Q2 | Q3 | YTD | YTD | |Statistics|Sep 30|Jun 30
2010|Sep 30 2009|Sep 30 2010|Sep 30 2009| | | 2010 | | | | |
|__________|______|___________|___________|___________|___________|
|Gold Sales|67,672| 67,347 | 71,492 | 200,060 | 227,904 | |(Ounces)
| | | | | |
|__________|______|___________|___________|___________|___________|
| | USD | USD | USD | USD | USD |
|__________|______|___________|___________|___________|___________|
|Average |1,232 | 1,191 | 838 | 1,059 | 747 | |Price | | | | | |
|Received | | | | | | |($ per | | | | | | |ounce) | | | | | |
|__________|______|___________|___________|___________|___________|
|Cash | 568 | 564 | 473 | 561 | 388 | |Operating | | | | | | |Cost
($ | | | | | | |per ounce)| | | | | |
|__________|______|___________|___________|___________|___________|
|Cash | 664 | 627 | 365 | 498 | 359 | |Operating | | | | | |
|Margin ($ | | | | | | |per ounce)| | | | | |
|__________|______|___________|___________|___________|___________|
|Non-Cash | 266 | 277 | 249 | 271 | 204 | |Cost ($ | | | | | | |per
ounce)| | | | | |
|__________|______|___________|___________|___________|___________|
|Total | 834 | 841 | 722 | 832 | 592 | |Operating | | | | | | |Cost
($ | | | | | | |per ounce)| | | | | |
|__________|______|___________|___________|___________|___________|
|Total Cash|19.76 | 21.86 | 19.83 | 21.10 | 17.13 | |Operating | |
| | | | |Cost ($ | | | | | | |per tonne | | | | | | |processed)| |
| | | |
|__________|______|___________|___________|___________|___________|
_____________________________________________________________________
|Combined | Q3 | Q2 | Q3 | YTD | YTD | |Operating | Sep 30 | Jun 30
| Sep 30 | Sep 30 |Sep 30 2009| |Statistics | 2010 | 2010 | 2009 |
2010 | |
|_____________|__________|__________|__________|__________|___________|
|Gold produced| 68,763 | 67,541 | 70,020 | 201,595 | 228,297 |
|(ounces) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Total Ore |1,807,007 |1,872,020 |1,521,202 |5,751,117 | 4,036,145
| |Mined | | | | | | |(tonnes) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Ore Mined | 1.46 | 1.38 | 1.71 | 1.43 | 2.10 | |grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|__________|__________|__________|__________|___________|
|Total Waste
|16,663,727|13,405,239|16,437,702|48,609,037|45,847,924 | |Mined |
| | | | | |(tonnes) - | | | | | | |incl | | | | | | |pre-strip | |
| | | |
|_____________|__________|__________|__________|__________|___________|
|Mill Feed |1,944,344 |1,737,669 |1,705,948 |5,317,671 | 5,156,198
| |(dry milled | | | | | | |tonnes) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Mill Feed | 1.33 | 1.41 | 1.59 | 1.42 | 1.71 | |Grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|__________|__________|__________|__________|___________|
|Recovery (%) | 82.4% | 84.0% | 78.3% | 82.8% | 80.1% |
|_____________|__________|__________|__________|__________|___________|
___________________________________________________________________
|Combined | Q3 | Q2 | Q3 | YTD | YTD | |Financial |Sep 30 2010|Jun
30|Sep 30 2009|Sep 30 2010|Sep 30 2009| |Results | $'000 | 2010 |
$'000 | $'000 | $'000 | | | |$'000 | | | |
|____________|___________|______|___________|___________|___________|
|EBITDA | 42,608 |39,169| 24,425 | 90,256 | 77,941 | |(excluding |
| | | | | |unrealised | | | | | | |gain on | | | | | | |hedges) | |
| | | |
|____________|___________|______|___________|___________|___________|
|Earnings | 13,683 |7,968 | 1,859 | 12,105 | 17,894 | |after
income| | | | | | |tax and | | | | | | |before | | | | | |
|undesignated| | | | | | |gain/(loss) | | | | | | |on hedges | | |
| | | |(net of tax)| | | | | |
|____________|___________|______|___________|___________|___________|
|Reported | 42,608 |39,155| 41,484 | 106,471 | 142,332 | |EBITDA |
| | | | | |(including | | | | | | |unrealised | | | | | | |gain/ |
| | | | | |(loss) on | | | | | | |hedges) | | | | | |
|____________|___________|______|___________|___________|___________|
|Reported | 13,683 |7,958 | 13,800 | 23,456 | 62,968 | |earnings/ |
| | | | | |(loss) after| | | | | | |income tax | | | | | |
|(including | | | | | | |unrealised | | | | | | |gain/(loss) | | |
| | | |on hedges) | | | | | |
|____________|___________|______|___________|___________|___________|
PRODUCTION Gold production for the third quarter of 2010 was 68,763
ounces, an increase on Q2, though wet conditions at Reefton
somewhat hampered overall production for the quarter. Total
production for the year is 201,595 ounces. Year to date cash costs
are $561/oz which is higher than expected and pre-dominantly on
account of the ongoing weakness in the US$. Since June this year,
the US$ has declined approximately 10% against the NZ$. OPERATIONS
Macraes Goldfield (New Zealand) The Macraes operations (open-pit
and underground) incurred one lost time injury (LTI) during the
quarter compared to one during the same period last year.
Production from the Macraes Goldfield for the quarter was 49,733
gold ounces, 20% higher than the previous quarter driven by strong
performance at the mill with increased processing throughputs and
mining movements both in the open cut and underground. Total
material mined at Macraes was 14.6 million tonnes, an increase of
27% on the previous quarter. The stronger mining performance was
driven by good weather conditions as well as improved excavator
availability. This will be further enhanced by the commissioning of
a new HITACHI EX3600 excavator at the end of the quarter. The new
excavator is expected to further improve reliability of the
excavator fleet. At the Frasers underground mine total ore mined
for the quarter was 241,000 tonnes, a 14% increase on the previous
quarter. On July 1(st), the Company transitioned to owner-mining
replacing contract mining which had been in place since the mine
commissioned in January 2008. The transition has gone to plan with
98% of employees transferring over to the Company. In August, a
monthly production record for ore tonnes mined and development
advance was achieved. A new twin-boom jumbo drill was also
commissioned during the quarter which will improve reliability and
productivity for development advance. Mill throughput during the
quarter improved to 1.48 million tonnes compared to 1.34 million
tonnes in the previous quarter. This was mainly due to the use of
blended ore stockpiles that have helped minimise spikes in ore
hardness allowing for more consistent mill performance and less
re-circulating loads. Process plant recoveries at Macraes were
82.3%, slightly down on the previous quarter at 83.9%, but in-line
with expectations. Reefton Goldfield (New Zealand) One LTI occurred
in the third quarter compared to three during the same period last
year. The introduction of the Positive Attitude Safety System
(PASS) during the first half of the year has reinforced the
priority for safety across the workforce. Total material mined was
flat during the quarter with ore mined down 14%. Wet conditions on
the west coast of the South Island of New Zealand resulted in poor
access to the pit floor due to flooding during the quarter
consequently the mining fleet was deployed to mine waste during
this period. This resulted in average mined ore grades being lower
at 1.95 g/t compared to 2.27 g/t achieved in the previous quarter.
Lower grade stockpiles were utilised in place of the run of mine
ore in a mill feed grade of 1.51 g/t, significantly lower than
previous periods. The lower average ore grades processed through
the mill was partially offset by another record quarter with
throughputs of 467,000 tonnes. This was a 17% increase on the
previous quarter's performance and a 51% increase in throughput
compared to the same period last year. The increase in mill
throughput is primarily the result of optimisation of the milling
circuit and specifically the grinding media which resulted in more
efficient grinding and lower re-circulating loads. Flotation
recoveries continue to be strong at 88.6% with overall recoveries
of 82.7% which was slightly lower compared to the previous quarter
but in-line with expectations. Gold production attributable to
Reefton was 19,031 ounces, 7,000 ounces lower than Q2 2010. This
reflects the lower mill feed grade on account of the higher
proportions of lower grade stockpiles processed during the quarter.
More favourable seasonal conditions are expected in Q4 which
combined with strong mill throughputs is expected to result in a
production rate more in line with Q2 performance. - Table 2 -
Macraes Operating Statistics
_____________________________________________________________________
|Macraes | Q3 | Q2 | Q3 | YTD | YTD | |Goldfield | Sep 30 | Jun 30
| Sep 30 | Sep 30 |Sep 30 2009| |Operating | 2010 | 2010 | 2009 |
2010 | | |Statistics | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Gold produced| 49,732 | 41,504 | 48,065 | 135,401 | 165,579 |
|(ounces) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Total Ore |1,484,108 |1,497,042 |1,148,017 |4,704,609 | 3,004,844
| |Mined | | | | | | |(tonnes) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Ore Mined | 1.35 | 1.16 | 1.47 | 1.24 | 1.96 | |grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|__________|__________|__________|__________|___________|
|Total Waste
|13,179,718|10,027,271|13,591,306|37,238,219|37,123,550 | |Mined |
| | | | | |(tonnes) incl| | | | | | |pre-strip | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Mill Feed |1,476,665 |1,336,605 |1,396,186 |4,103,208 | 4,225,338
| |(dry milled | | | | | | |tonnes) | | | | | |
|_____________|__________|__________|__________|__________|___________|
|Mill Feed | 1.27 | 1.16 | 1.38 | 1.24 | 1.52 | |Grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|__________|__________|__________|__________|___________|
|Recovery (%) | 82.3% | 83.9% | 77.6% | 82.5% | 79.9% |
|_____________|__________|__________|__________|__________|___________|
- Table 3 - Reefton Operating Statistics
_____________________________________________________________________
|Reefton | Q3 | Q2 | Q3 | YTD | YTD | |Goldfield | Sep 30 | Jun 30
|Sep 30 2009|Sep 30 2010|Sep 30 2009| |Operating | 2010 | 2010 | |
| | |Statistics | | | | | |
|_____________|_________|_________|___________|___________|___________|
|Gold produced| 19,031 | 26,037 | 21,955 | 66,194 | 62,718 |
|(ounces) | | | | | |
|_____________|_________|_________|___________|___________|___________|
|Total Ore | 322,899 | 374,978 | 373,185 | 1,046,508 | 1,031,301 |
|Mined | | | | | | |(tonnes) | | | | | |
|_____________|_________|_________|___________|___________|___________|
|Ore Mined | 1.95 | 2.27 | 2.45 | 2.29 | 2.48 | |grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|_________|_________|___________|___________|___________|
|Total Waste |3,484,009|3,377,968| 2,846,396 |11,370,818 |
8,724,374 | |Mined | | | | | | |(tonnes) incl| | | | | | |pre-strip
| | | | | |
|_____________|_________|_________|___________|___________|___________|
|Mill Feed | 467,679 | 401,064 | 309,762 | 1,214,463 | 930,860 |
|(dry milled | | | | | | |tonnes) | | | | | |
|_____________|_________|_________|___________|___________|___________|
|Mill Feed | 1.51 | 2.25 | 2.55 | 2.02 | 2.59 | |Grade | | | | | |
|(grams/tonne)| | | | | |
|_____________|_________|_________|___________|___________|___________|
|Recovery (%) | 82.7% | 84.3% | 81.5% | 83.7% | 81.1% |
|_____________|_________|_________|___________|___________|___________|
DEVELOPMENT Didipio Gold - Copper Project (The Philippines) The
Didipio Gold and Copper project in Luzon province, Philippines
remains under care and maintenance with a reduced workforce at the
project site. In September, the Company announced the completion of
the internal economic and technical re-optimisation study. The
study addresses a review of the mining method, scheduling, process
plant layout and infrastructure requirements and associated capital
to recommence construction and complete the project. The study
outlines a project with a 20 year mine life operating at 2.5 Mtpa
for the first six years as an open cut and includes the transition
to a 1.2 Mtpa underground operation in year 6. Production will
average 71,000 ounces of gold and 32 million pounds of copper over
the first 6 years (at a gold cash cost, after copper credits of
-$340/oz) and then move to 67,000 ounces of gold and 12 million
pounds of copper for Years 7-20. Capital expenditure to complete
the construction and commissioning (including contingency) is
estimated at $140 million, with construction over 15-21 months from
the date of recommencement. A NI 43-101 technical report on the
re-optimised project will be released in the fourth quarter. No
lost time injuries (LTI) were recorded during the quarter.
OceanaGold continues to maintain robust programs for community
partnerships and the environment at the project and surrounding
areas. Community initiatives during the quarter focused on building
partnerships to promote community based organisations in the areas
of organisational and enterprise development. Education and health
continue to be one of the most important components of the
company's social development programs as the company received
recognition from partner institutions such as the Department of
Education and the Municipal Rural Health Unit for its contribution
to these areas. One of the latest initiatives in the areas of
health and education is the participation of the company in the
"Essential Health Program for Filipino Children". This program
addresses high impact childhood diseases by using schools and day
care centers as venues for health promotion and behavioral change.
During the program launch in September 2010 at Didipio, the Company
provided essential health packs for more than 500 children and
sponsored a dental mission that treated 100 students. For the
second year in a row, the Company has been nominated for the
"Best Forestry Program" by a mining company in the Philippines in
recognition for its reforestation and rehabilitation efforts within
the Didipio project. As of this quarter, the Company has
established over 100 hectares of reforestation plantations within
the project area. Additionally, the Company has recently added the
propagation of local medicinal plants and various vegetable crops
as part of its FAITH Garden program. EXPLORATION Exploration
expenditure for the third quarter totalled $3.6 million bringing
the year to date total to $7.3 million. New Zealand Macraes
Goldfield 3,600 metres of underground drilling was completed at
Frasers Underground which was spread across three programs focusing
on the eastern-down dip extension, Panel 2 Deeps (P2 Deeps) and the
Kempe rise drilling program on the northern fringes of the deposit.
The P2 Deeps (announced July 12) exploration has continued.
12 holes were drilled in the campaign with intersections of ore in
the range 2.53g/t to 7.11g/t. The area under current drilling
is directly to the south of the current P2 Deeps reserve area.
Resource modeling of this area is underway and is likely to see
further extensions to the reserves. Further initial results from a
down-dip exploration drive drilling program were received
(announced July 21). The first 20 holes were tabled with the best
hangingwall shear intersections of ore up to 5.55g/t. In addition,
a new sub parallel mineralised zone not contiguous with the current
Panel 2 Deeps structure was intersected and returned good grades
and widths from a number of holes. Some of the more significant
intercepts of ore are up to 7.98g/t. Two underground drill rigs are
currently testing for extensions at depth and to the north of the
already identified mineralised zones. Additionally, further infill
drilling is expected to continue to upgrade the resource to
Measured and Indicated categories. Resource modeling has commenced
on the first zone of results immediately adjacent to the existing
Panel 2 Reserve. On the surface at the Macraes open cut, drilling
programs were completed at Coronation, Golden Bar and Macraes
North. An extensive infill drilling program also commenced at the
historic Innes Mills deposit. This program is focusing on examining
the potential for a further open pit stage development. During the
quarter a 4,700 meter surface drilling program at the Coronation
deposit extended the known resources down-dip and improved the
confidence with some of the resource to Measured and Indicated.
Reefton Goldfield A number of exploration programs were ongoing at
the Reefton Goldfield during the quarter. The total exploration
resource group at Reefton is now at full complement and includes
drilling contractors for 5 operating drill rigs. Two diamond and
one reverse circulation drill rigs were operating at Globe Deeps
and completed 7,600 meters of drilling during the quarter. This
program is targeting further down dip extensions of the main
Globe-Progress ore-body, testing for both open pit and underground
mining targets. The program is testing beyond the extent of known
historic underground workings with mineralisation consistent with
current open pit styles being intersected to date. A helicopter
assisted drilling program continued during the quarter on a target
to the north west of the current mining activities. This was the
second phase of the program on this target. At the historic
Blackwater underground mine, diamond drilling commenced on a new
program targeting the current inferred resource below the historic
Birthday Reef which was mined as a high-grade narrow veined quartz
reef until the early 1950's. This program is expected to be
completed early in 2011. Sampling programs using backpack mounted
drill rigs have delivered positive results with more than 750
samples from targets up to 8m beneath the cover obtained in often
challenging terrain. This completes phase 1 of the geo-chemical
sampling campaign with results now being analysed to provide
information to generate high priority drilling targets. Phase 2 of
the geo-chemical sampling program has now commenced on targets
identified through the winter by the regional mapping teams.
Geo-chemical lines (testing) is underway in the historic Big River
field where there were a number of high-grade underground mines
operating between 1870 and 1950. The sampling to date has also
identified two areas of particular interest where in-fill samples
will be reviewed for potential drilling targets early in 2011. The
Philippines During the third quarter, further exploration review
over prospects within the area defined under Didipio Financial
Technical Assistance Agreement was undertaken. New mapping
and sampling data warrant further groundwork of these areas to
identify drill targets. FINANCIAL SUMMARY The table below provides
selected financial data comparing Q3 2010 with Q2 2010 and Q3 2009
together with year to date September 2010 compared to year to date
September 2009.
____________________________________________________________________
| | Q3 | Q2 | Q3 | | YTD | | | Sep 30 | Jun 30 |Sep 30 2009| YTD
|Sep 30 2009| |STATEMENT OF | 2010 | 2010 | $'000 |Sep 30 2010|
$'000 | |OPERATIONS | $'000 | $'000 | | $'000 | |
|______________|________|________|___________|___________|___________|
|Gold sales | 83,344 | 80,218 | 59,928 | 211,861 | 170,208 |
|______________|________|________|___________|___________|___________|
|Cost of sales,|(37,847)|(37,560)| (32,972) | (110,770) | (86,770)
| |excluding | | | | | | |depreciation | | | | | | |and | | | | | |
|amortisation | | | | | |
|______________|________|________|___________|___________|___________|
|General & |(3,309) |(3,132) | (2,512) | (10,821) | (5,497) |
|Administration| | | | | |
|______________|________|________|___________|___________|___________|
|Foreign | 639 | 49 | 34 | 572 | (6) | |Currency | | | | | |
|Exchange Gain/| | | | | | |(Loss) | | | | | |
|______________|________|________|___________|___________|___________|
|Other income/ | (219) | (406) | (54) | (586) | 6 | |(expense) | |
| | | |
|______________|________|________|___________|___________|___________|
|Earnings | 42,608 | 39,169 | 24,424 | 90,256 | 77,941 | |before |
| | | | | |interest, tax,| | | | | | |depreciation &| | | | | |
|amortisation | | | | | | |(EBITDA) | | | | | | |(excluding | | | |
| | |gain/(loss) on| | | | | | |undesignated | | | | | | |hedges) |
| | | | |
|______________|________|________|___________|___________|___________|
|Depreciation |(17,832)|(18,531)| (18,199) | (53,935) | (47,075) |
|and | | | | | | |amortisation | | | | | |
|______________|________|________|___________|___________|___________|
|Net interest |(3,846) |(3,706) | (3,937) | (11,342) | (10,639) |
|expense | | | | | |
|______________|________|________|___________|___________|___________|
|Earnings/ | 20,930 | 16,932 | 2,288 | 24,979 | 20,227 | |(loss)
before | | | | | | |income tax and| | | | | | |gain/(loss) on| | |
| | | |undesignated | | | | | | |hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Tax on |(7,247) |(8,964) | (429) | (12,874) | (2,333) | |earnings
/ | | | | | | |loss | | | | | |
|______________|________|________|___________|___________|___________|
|Earnings after| 13,683 | 7,968 | 1,859 | (12,105) | 17,894 |
|income tax and| | | | | | |before gain/ | | | | | | |(loss) on | |
| | | | |undesignated | | | | | | |hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Gain / (loss) | - | (14) | 17,059 | 16,216 | 64,391 | |on fair
value | | | | | | |of | | | | | | |undesignated | | | | | | |hedges
| | | | | |
|______________|________|________|___________|___________|___________|
|Tax on | - | 4 | (5,118) | (4,865) | (19,317) | |(gain)/loss on| |
| | | | |undesignated | | | | | | |hedges | | | | | |
|______________|________|________|___________|___________|___________|
|Net earnings/ | 13,683 | 7,958 | 13,800 | 23,456 | 62,968 |
|(loss) | | | | | |
|______________|________|________|___________|___________|___________|
|Basic | $0.06 | $0.03 | $0.08 | $0.11 | $0.38 | |earnings/ | | | |
| | |(loss) per | | | | | | |share | | | | | |
|______________|________|________|___________|___________|___________|
|Diluted | $0.06 | $0.03 | $0.07 | $0.11 | $0.33 | |earnings/ | | |
| | | |(loss) per | | | | | | |share | | | | | |
|______________|________|________|___________|___________|___________|
|CASH FLOWS | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows | 37,627 |(21,174)| 21,648 | 6,193 | 65,008 | |from
Operating| | | | | | |Activities | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows |(36,131)|(21,236)| (20,572) | (75,462) | (50,063) |
|from Investing| | | | | | |Activities | | | | | |
|______________|________|________|___________|___________|___________|
|Cash flows | 11,001 |(4,200) | 15,456 | 81,582 | 10,173 | |from
Financing| | | | | | |Activities | | | | | |
|______________|________|________|___________|___________|___________|
__________________________________________________ | | As at | As
at | | |Sep 30 2010|Dec 31 2009| |BALANCE SHEET | $'000 | $'000 |
|__________________________|___________|___________| |Cash and cash
equivalents | 55,396 | 42,423 |
|__________________________|___________|___________| |Other Current
Assets | 38,039 | 39,038 |
|__________________________|___________|___________| |Non Current
Assets | 753,351 | 706,245 |
|__________________________|___________|___________| |Total Assets
| 846,786 | 787,706 |
|__________________________|___________|___________| |Current
Liabilities | 111,028 | 185,061 |
|__________________________|___________|___________| |Non Current
Liabilities | 214,777 | 210,032 |
|__________________________|___________|___________| |Total
Liabilities | 325,805 | 395,093 |
|__________________________|___________|___________| |Total
Shareholders' Equity| 520,981 | 392,613 |
|__________________________|___________|___________| RESULTS OF
OPERATIONS Net Earnings The Company reported a net profit of $13.7
million in the third quarter compared to a net profit of $7.9
million in Q2 2010. Total production of 68,763 ozs was 1.8% higher
than Q2 2010 although 1.8% lower for the comparative period in
2009. Revenue has increased by 3.9% over Q2 2010 and is a
result of price increases with all sales being made into the gold
spot market after the hedge book was closed out with effect from
March 31, 2010. The average gold price received was $1,232
compared to $1,191 in Q2. The year to date average gold price
is $1,059. The impact of non-cash charges for marked to market
gains and losses on hedges have in the past been significant.
Consequently, EBITDA (earnings before interest, tax, depreciation
and amortisation excluding gains/losses on undesignated hedges) and
EBIT (earnings before interest and tax before undesignated hedge
gains/losses) are reported as measures of operating performance on
a consistent and comparable basis. The Company reported EBITDA
before gains/losses on undesignated hedges of $42.6 million
compared with $39.2 million in Q2 2010. This strong operating
result has been achieved by higher gold revenue from increased gold
prices. The year to date EBITDA before gains/losses on undesignated
hedges is $90.2 million. The earnings before income tax is a profit
of $20.9 million compared to a Q2 2010 profit of $16.9 million.
Improvement is a direct function of the increased sales revenue as
costs have been relatively stable over the period. Sales
Revenue Gold revenue of $83.3 million was a 3.9% increase over Q2
2010 due to a small increase in sales volumes combined with a 3.4%
increase in the average price received. All sales were at
spot prices after close out of the hedge book in March 2010.
Gold sales year to date 2010 were 24.5 % above 2009 due to higher
gold sales prices and only one quarter of hedged sales. Gold sales
volumes for Q3 2010 of 67,672 ounces were slightly higher compared
to Q2 2010 which were 67,347 ounces. Undesignated Hedges
Gains/Losses Undesignated hedge gains and losses calculated as a
fair value adjustment of the Company's undesignated hedges have
previously been brought to account at the end of each reporting
period, and reflected changes in the spot gold price. This
also includes adjustments made to take account of gold deliveries
into the hedge book, as the derivative liability was
released. These valuation adjustments, year to date to
September 30, 2010, reflect a gain of $16.2 million which is
attributable to Q1 2010 prior to when the hedge book was closed
out. Using proceeds from the share placement in March, all forward
and call derivative instruments were settled. The Company's
current policy is to be unhedged with all gold production sold into
the market at spot rates. Operating Costs & Margins Cash costs
per ounce sold were $568 in Q3, slightly higher than the previous
quarter. NZD costs were relatively stable over the
quarter. In comparison to the prior year cash unit costs are
higher in USD terms due to both an exchange rate impact and lower
production volumes. The cash margin of $664 per ounce resulted in
earnings before interest, tax, depreciation & amortisation
(excluding undesignated hedge gains/losses) of $42.6 million for
the quarter, compared to $39.2 million in Q2 2010. Depreciation and
Amortisation Depreciation and amortisation charges are calculated
on a unit of production basis and total $17.8 million for the
quarter. These charges were slightly lower than Q2 2010.
Depreciation and amortisation charges include amortisation of mine
development, deferred waste stripping costs and depreciation on
equipment. Net Interest expense The net interest expense of $3.8
million is consistent with Q2 2010. Year to date interest
expense is $11.3m and is associated with a project loan,
convertible notes and finance leases. DISCUSSION OF CASH FLOWS
Operating Activities Cash flows from operating activities increased
to be a net inflow of $37.6 million compared to $21.2 million
outflow in Q2 2010. This net outflow in Q2 included a payment
of $56.7 million to settle the balance of hedge contracts.
The strong inflow reflects significant benefit from higher average
gold prices being experienced from spot gold sales. Investing
Activities Investing activities were comprised of expenditures for
pre-stripping and sustaining capital at the New Zealand operations,
plus some capitalised holding costs associated with the Didipio
Gold - Copper Project. Cash used for investing activities totaled
$36.1 million compared to $21.2 million and $20.6 million in Q2
2010 and Q3 2009 respectively. The increase reflects the
acquisition of a new excavator at the Macraes open pit and
underground mining equipment (after transition to owner mining at
the Frasers underground mine). Financing Activities Finance inflows
were $11.0 million representing lease financing for new equipment,
including an excavator and underground mining equipment, offset by
lease payments. The year to date cash inflow of $81.6m
includes the equity placement in March that raised $79.5 million
net of costs. DISCUSSION OF FINANCIAL POSITION AND LIQUIDITY
Company's funding and capital requirements For the quarter ended
September 30, 2010, the Company earned a net profit of $13.7
million. As at that date, the current liabilities of the Company
exceeded current assets by $17.6 million. Current liabilities
include $53.8 million of convertible notes. Cash flow projections
for the near term indicate sufficient funds will be generated to
meet all operating obligations at the current forecast gold price.
On October 6, 2010 the Company announced that it has secured,
through Private Placement commitments for 12,023,360 Special
Warrants at C$3.50 for proceeds of C$42.1m (before costs) and
20,976,640 CHESS Depository Interests (CDI's) at A$3.54 for
proceeds of A$74.3 million (before costs). Proceeds were
settled on October 20, 2010. Commitments OceanaGold's capital
commitments as at September 30, 2010 are as follows: Sep 30 2010
$'000 Within 1 year 12,722 These commitments include equipment
associated with a move to owner mining at the Frasers underground
mine in addition to orders for long lead time mining
equipment. Certain of these commitments are expected to be
serviced with lease contracts. During the period the company
entered into capital lease commitments for $10.3 million to fund
the acquisition of primarily mobile mining equipment. There
have been no other material changes in the capital and operating
lease commitments as disclosed in the December 31, 2009 audited
financial statements. Additions to leases have been to a
certain extent, offset by payments on leases with the strengthening
NZD increasing the lease liability in USD. Financial position
Current Assets Current assets have increased by $26.9 million since
Q2 primarily due to an increase in cash of $18.5 million generated
from operations and an increase in inventory of $5.8 million.
Non-Current Assets At the end of the quarter, non-current assets
were $753.4 million compared to $664.5 million at June 2010.
The expenditure on Property, Plant and Equipment, Mining Assets and
non-current inventories was higher than depreciation and
amortisation due to additional leased equipment and an increase in
asset values due to the weakening USD dollar. Future income
tax assets decreased by $2.4 million largely due to utilisation of
tax losses. Current Liabilities Current liabilities increased $29.3
million during the quarter. This reflects some increases in
leases for new equipment and the disclosure as current for lease
residuals on the truck fleet in July 2011. In addition the
liability for convertible notes and lease liabilities has increased
as the NZD and AUD has strengthened against the USD. Non-Current
Liabilities Non-current liabilities are $214.8 million at September
30 2010 and have increased by $20.8 million since June 30, 2010.
This is due to an increase in future tax liabilities of $10.9
million combined with the translation impact from a weakening US
dollar. Derivative Assets / Liabilities OceanaGold settled
derivative instruments in relation to 74,880 ounces under forward
gold sales contracts and 78,018 ounces under gold put options at
the end of March 2010. A summary of OceanaGold's marked to market
adjustment on derivatives is: Sep 30 2010 Dec 31 2009 $'000 $'000
Current Assets Gold put options 1 141 Total Assets 1 141 Sep 30
2010 Dec 31 2009 $'000 $'000 Current Liabilities Gold forward sales
contracts - 54,557 Gold call options - 35,318 Total Liabilities -
89,875 Shareholders' Equity A summary of the movement in
shareholders' equity is set out below: Quarter Ended Sep 30 2010
$'000 Total equity at beginning of financial period 455,316
Profit/(loss) after income tax 13,683 Movement in other
comprehensive income 49,945 Movement in contributed surplus (281)
Equity raising (net of costs) 2,318 Total equity at end of
financial period 520,981 Shareholders' equity has increased to $521
million at quarter end primarily as a result of the profit earned
for the quarter, and gains from currency translation differences
reflected in Other Comprehensive Income that arises from the
translation of entities with a functional currency other than
USD. The USD depreciated significantly against the AUD and
NZD during the quarter. Capital Resources As at September 30, 2010,
the share and securities summary was: Shares outstanding
228,897,612 Options outstanding 4,560,151 As at December 31, 2009,
the share and securities summary was: Shares outstanding
185,880,075 Options outstanding 5,637,259 As at October 28, 2010
share and securities summary is: Shares outstanding 249,874,252
Options outstanding 4,560,151 Special Warrants 12,023,360 CRITICAL
ACCOUNTING ESTIMATES AND ACCOUNTING POLICIES The accounting
policies that involve significant management judgment and estimates
are discussed in this section. For a complete list of the
significant accounting policies, reference should be made to Note 1
of the 2009 audited consolidated financial statements of OceanaGold
Corporation. Exploration and Evaluation Expenditure Exploration and
evaluation expenditure is stated at cost and is accumulated in
respect of each identifiable area of interest. Such costs are only
carried forward to the extent that they are expected to be recouped
through the successful development of the area of interest (or
alternatively by its sale), or where activities in the area have
not yet reached a stage which permits a reasonable assessment of
the existence or otherwise of economically recoverable resources,
and active work is continuing. Accumulated costs in relation to an
abandoned area are written off to the Statement of Operations in
the period in which the decision to abandon the area is made. A
regular review is undertaken of each area of interest to determine
the appropriateness of continuing to carry forward costs in
relation to that area of interest. Mining Properties in Production
or Under Development Expenditure relating to mining properties in
production and development are accumulated and brought to account
at cost less accumulated amortisation in respect of each
identifiable area of interest. Amortisation of capitalised
costs, including the estimated future capital costs over the life
of the area of interest, is provided on the production output
basis, proportional to the depletion of the mineral resource of
each area of interest expected to be ultimately economically
recoverable. Costs associated with the removal of
overburden and other mine waste materials that are incurred in the
production phase of mining operations are included in the costs of
inventory in the period in which they are incurred, except when the
charges represent a betterment to the mineral property. Charges
represent a betterment to the mineral property when the stripping
activity provides access to reserves that will be produced in
future periods that would not have been accessible without the
stripping activity. When charges are deferred in relation to a
betterment, the charges are amortised over the reserve in the
betterment accessed by the stripping activity using the units of
production method. A regular review is undertaken of each area of
interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest. Should
the carrying value of expenditure not yet amortised exceed its
estimated recoverable amount, the excess is written off to the
Statement of Operations. Asset Retirement Obligations OceanaGold
recognises the fair value of future asset retirement obligations as
a liability in the period in which it incurs a legal obligation
associated with the retirement of long-lived assets that results
from the acquisition, construction, development and/or normal use
of the assets. OceanaGold concurrently recognises a
corresponding increase in the carrying amount of the related
long-lived asset that is depreciated over the life of the
asset. The key assumptions on which the fair value of the
asset retirement obligations are based include the estimated future
cash flow, the timing of those cash flows and the credit-adjusted
risk-free rate or rates on which the estimated cash flows have been
discounted. Subsequent to the initial measurement, the liability is
accreted over time through periodic charges to earnings. The amount
of the liability is subject to re-measurement at each reporting
period if there has been a change to the key assumptions. Asset
Impairment Evaluations The carrying values of exploration,
evaluation, mining properties in production or under development
and plant and equipment are reviewed for impairment when events or
changes in circumstances indicate the carrying value may not be
recoverable. If any such indication exists and where the carrying
value exceeds the undiscounted future cash flows from these assets,
the assets are written down to the fair value of the future cash
flows based on OceanaGold's discount rate of the asset. Derivative
Financial Instruments /Hedge Accounting The consolidated entity can
use derivative financial instruments to manage commodity price and
foreign currency exposures from time to time. Derivative financial
instruments are initially recognised in the balance sheet at fair
value and are subsequently re-measured at their fair values at each
reporting date. The fair value of gold hedging
instruments is calculated by discounting the future value of the
hedge contract at the appropriate prevailing quoted market rates at
the reporting date. The fair value of forward exchange contracts is
calculated by reference to current forward exchange rate for
contracts with similar maturity profiles. Certain derivative
instruments do not qualify for hedge accounting or have not been
accounted for as fair value or cash flow hedges. Changes in
the fair value of these derivative instruments are recognised
immediately in the statement of operations. The company does not
have any designated hedges. Stock Option Pricing Model Stock
options granted to employees or external parties are measured by
reference to the fair value at grant date and are recognised as an
expense in equal installments over the vesting period and credited
to the contributed surplus account. The expense is determined using
an option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the non-tradable
nature of the option, the current price and expected volatility of
the underlying share, the expected dividend yield and the risk free
interest rate for the term of the option. Income Tax The Group
follows the liability method of income tax allocation. Under this
method, future tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets
and liabilities and are measured using the substantially enacted
tax rates and laws that will be in effect when the differences are
expected to reverse. A valuation allowance is provided to the
extent that it is more likely than not that those future income tax
assets will not be realised. Foreign Currency Translation The
consolidated financial statements are expressed in United States
dollars ("USD") and have been translated to USD using the current
rate method described below. The controlled entities of OceanaGold
have either Australian dollars ("AUD"), New Zealand dollars ("NZD")
or United States dollars ("USD") as their functional currency.
OceanaGold employs the current rate method of translation for its
self-sustaining operations. Under this method, all assets and
liabilities are translated at the period end rates and all revenue
and expense items are translated at the average exchange rates for
recognition in the statement of operations. Differences arising
from these foreign currency translations are recorded in
shareholders' equity as a cumulative translation adjustment.
OceanaGold employs the temporal method of translation for its
integrated operations. Under this method, monetary assets and
liabilities are translated at the period end rates and all other
assets and liabilities are translated at applicable historical
exchange rates. Revenue and expense items are translated at the
rate of exchange in effect at the date the transactions are
recognised in the statement of operations, with the exception of
depreciation and amortisation which is translated at the historical
rate for the associated asset. Exchange gains and losses on
currency translation adjustments are included in the statement of
operations. ACCOUNTING ESTIMATES The preparation of financial
statements in conformity with Canadian GAAP requires management to
make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and related notes.
Significant areas where management's judgment is applied include
ore reserve and resource determinations, exploration and evaluation
assets, mine development costs, plant and equipment lives,
contingent liabilities, current tax provisions and future tax
balances and asset retirement obligations. Actual results may
differ from those estimates. RISKS AND UNCERTAINTIES This document
contains some forward looking statements that involve risks,
uncertainties and other factors that could cause actual results,
performance, prospects and opportunities to differ materially from
those expressed or implied by those forward looking statements.
Factors that could cause actual results or events to differ
materially from current expectations include, among other things:
volatility and sensitivity to market prices for gold; replacement
of reserves; procurement of required capital equipment and
operating parts and supplies; equipment failures; unexpected
geological conditions; political risks arising from operating in
certain developing countries; inability to enforce legal rights;
defects in title; imprecision in reserve estimates; success of
future exploration and development initiatives; operating
performance of current operations; ability to secure long term
financing and capital, water management, environmental and safety
risks; seismic activity, weather and other natural phenomena;
failure to obtain necessary permits and approvals from government
authorities; changes in government regulations and policies
including tax and trade laws and policies; ability to maintain and
further improve labour relations and other development and
operating risks. For further detail and discussion of risks and
uncertainties refer to the Annual Information Form available on the
Company's website. CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL
ADOPTION There have been no material changes from the accounting
policies of FY2009. Adoption of new accounting policies The CICA
issued three new accounting standards in January 2009: Section
1582, "Business Combinations", Section 1601, "Consolidated
Financial Statements" and Section 1602, "Non-Controlling
interests". These new standards will be effective for fiscal years
beginning on or after January 1, 2011. The Company is in the
process of evaluating the requirements of the new standards.
Section 1582, "Business Combinations" replaces section 1581,
"Business Combinations", and establishes standards for the
accounting for a business combination. It provides the
Canadian equivalent to IFRS 3 - "Business Combinations". The
section applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after January 1, 2011.
Sections 1601, "Consolidated Financial Statements", and 1602,
"Non-Controlling interests", together replace section 1600,
"Consolidated Financial Statements". Section 1601 establishes
standards for the preparation of consolidated financial statements
and applies to interim and annual consolidated financial statements
relating to fiscal years beginning on or after January 1, 2011.
Section 1602 "Non-Controlling interests" establishes standards for
accounting for non-controlling interest in a subsidiary in
consolidated financial statements subsequent to a business
combination. It is equivalent to the corresponding provisions of
IFRS 27 - "Consolidated and Separate Financial Statements" and
applies to interim and annual consolidated financial statements
relating to fiscal years beginning on or after January 1, 2011.
Accounting policies effective for future periods International
Financial Reporting Standards ("IFRS") The Canadian Institute of
Chartered Accountant's (CICA's) Accounting Standards Board
announced that publicly accountable enterprises will be required to
adopt IFRS effective January 1, 2011. At the effective date,
the balance sheet as at January 1, 2010 will require conversion to
IFRS to establish opening balances which will form the basis for
comparative information to be reported in 2011. OceanaGold
Corporation has continued to work on its transition to IFRS,
including assessment of the impact on its accounting systems and
financial statements. The conversion project includes review
of project team, governance, resources, key CGAAP to IFRS
differences, accounting policies and an implementation plan.
The financial reporting impact of transitioning to IFRS is
currently being evaluated and the quantitative impact has not been
fully determined at the date of this report. The following table
summarises the key activities in the transition plan and the
current status.
_____________________________________________________________________
|ACTIVITY |MILESTONES |STATUS |
|______________________|______________________|_______________________|
|Financial reporting: | | | | |Diagnostic analysis |Preliminary
assessment | | -- Complete |prepared. |of accounting and | |
diagnostic | |reporting differences | | assessment of |Management
and audit |has been completed | | accounting and|committee approval
for|based on full GAAP | | reporting |policy
recommendations|diagnostic. | | differences |and IFRS elections 2 |
| | between CGAAP |(nd) half of 2010. |Decisions in relation | |
and IFRS. | |to IFRS 1 elections and| | |Management and audit
|selection of IFRS | | |committee approval on |accounting policies
| | -- Assess IFRS 1 |IFRS consolidated |were reviewed by the | |
elections, |financial statements |audit committee in July| |
options and |during Q1 2011. |2010. | | selection of | | | | IFRS
|Final quantification |Preliminary drafting | | accounting |of
conversion effects |and consideration of | | policies. |on 2010
comparative |disclosure issues are | | |period Q4 2010 |being
assessed in the | | | |process of drafting | | -- Development of|
|IFRS reporting which | | IFRS financial| |has commenced in Q3. | |
statement | | | | format, | | | | including | | | | disclosures. |
| | | | | | | | | | | -- Quantification| | | | of effects of | | |
|________conversion.___|______________________|_______________________|
|Systems and processes:| | | | |Systems, processes and|Preliminary
assessment | | -- Assessment of |internal control |of potential
updates is| | impact of |documentation changes |underway. Based on
work| | changes to key|finalised Q4 2010. |done to date the impact|
| systems and | |on IT systems is not | | processes. |Evaluation
and update |expected to be | | |of controls and |significant. | |
|processes in Q1 2011 | | | -- Documentation | | | | and testing
of| | | | internal | | | | controls and | | | | disclosure | | | |
controls over | | | | amended | | | | systems and | | |
|________processes.____|______________________|_______________________|
|Business: | | | | |Contract analysis and |Preliminary assessment |
| -- Assessment of |impact to be completed|of the impacts on other|
| impacts on all|by Q4 2010. |areas of the business | | aspects of
the| |is underway. | | business, |Budgets and long term | | |
including |planning to |Communication is | | contractual
|incorporate outcomes |ongoing. | | arrangements. |of IFRS
transition | | | |from Q4 2010. | | | | | | | -- Communicate | | |
| conversion | | | | plan and | | | | progress | | | | internally
and| | | | externally. | | | | | | | | | | | | -- Training staff| |
| | and ensuring | | | | adequate | | | | financial | | | |
reporting | | | | expertise is | | |
|________in_place._____|______________________|_______________________|
First-time adoption of IFRS IFRS 1 requires that an entity apply
all standards effective at the end of its first IFRS reporting
period retrospectively. However, IFRS 1 does provide certain
mandatory and limited optional exemptions in specific areas of
certain standards that will not require retrospective application
of IFRS. The most significant exemptions which are expected
to apply in preparation of the company's first consolidated
financial statements under IFRS are summarised as follows:
Accounting Estimates Accounting estimates applied in accordance
with IFRS at the date of transition should be consistent with
estimates in accordance with Canadian GAAP unless there is
objective evidence that estimates were in error. Business
Combinations IFRS allows guidance under IFRS 3R Business
Combinations to be applied retrospectively or prospectively.
OceanaGold expects adopt IFRS 3 prospectively. Asset Retirement
Obligations (ARO) IFRIC 1 requires changes in decommissioning
liabilities to be included in the cost of the asset and
depreciated. A first-time adopter has an option to a
simplified approach to calculate and record the asset related to
the ARO. OceanaGold's existing approach complies with
recognition and measurement of decommissioning liabilities under
IFRS, including recording the liability in the cost of the asset,
by discounting the liability to the date when it first arose, and
depreciating the asset to transition date. There will be no
change on transition to IFRS. Property, Plant and Equipment There
is an option to record property, plant and equipment at fair value
on transition to IFRS. This fair value becomes the deemed
cost of the asset for reporting under IFRS. OceanaGold is not
planning to use this election and property, plant and equipment
will continue to be recorded under the cost model, at the carrying
amounts, on the date of transition to IFRS. Cumulative translation
differences IAS 21, The Effects of Changes in Foreign Exchange
Rates, requires an entity to determine the translation differences
in accordance with IFRS from the date on which a subsidiary was
formed or acquired. IFRS 1 allows cumulative translation
differences for all foreign operations to be deemed zero at the
date of transition to IFRS, with future gains or losses on
subsequent disposal of any foreign operations to exclude
translation differences arising from periods prior to the date of
transition to IFRS. OceanaGold expects to use this exemption and
existing cumulative translation differences will be transferred to
retained earnings on transition to IFRS. Key Differences - Canadian
GAAP to IFRS In addition to the exemptions and exceptions discussed
above, the following explains the key areas where changes in
accounting policies could have significant differences between
Canadian GAAP and IFRS as they apply to OceanaGold consolidated
financial statements: Impairment Canadian GAAP - A recoverability
test is performed by first comparing the undiscounted expected
future cash flows to be derived from the asset to its carrying
amount. If an asset's undiscounted expected future cash flows do
not exceed its carrying value, an impairment loss is calculated as
the excess of the asset's carrying amount over its fair value (on a
discounted basis). IFRS - A recoverability test is performed by
comparing the carrying amount to the asset's recoverable amount.
The impairment loss is calculated as the excess of the asset's
carrying amount over its recoverable amount. The recoverable amount
is defined as the higher of the asset's fair value less costs to
sell and its value-in-use. The expected future cash flows from the
asset are discounted to their net present value in the recoverable
amount test. As a result of this difference in measurement
methodology, impairments under IFRS are more likely. With the
Didipio project currently on care and maintenance there is
potential for material impairment to be required on its assets due
to a change in methodology for impairment testing. Foreign Exchange
Translation Canadian GAAP - Distinction is made between integrated
and self sustaining foreign operations with the temporal and the
current rate methods of translation applied respectively. IFRS - A
functional and presentation currency approach is taken to foreign
exchange translation and no distinction is made between integrated
and self sustaining foreign operations. Where the functional
currency of an entity is different from the presentation currency,
an approach similar to the current rate method under CGAAP is
applied. The key elements are: -- Assets and liabilities are
translated at the balance date exchange rate. -- Income and
expenses are translated at the exchange rate at the date of the
transaction although an average rate may be applied as a proxy in
many circumstances. -- All resulting currency exchange differences
are recognised in the Foreign Currency Translation Reserve (FCTR)
within other comprehensive income. The most significant differences
for OceanaGold are likely to be in relation to the Philippines
operations which are currently being treated as an integrated
foreign operation under CGAAP. There will be no change in the
current treatment of New Zealand operations which are classified
self-sustaining under CGAAP. Income tax Canadian GAAP - The amount
that a future income tax asset is recognised at is limited to the
amount that is more likely than not to be realised. Future
taxes are split between current and non-current components on the
basis of either (1) the underlying asset or liability or (2) the
expected timing reversal of items when not related to an asset or
liability. IFRS - Deferred tax assets are recognised in their
entirety when it is probable that sufficient future taxable profit
will be available to recover the asset. All deferred tax
assets and liabilities will be classified as non-current.
OceanaGold does not expect there to be changes in the deferred tax
assets currently recognised. The impact of the differences on
transition will be limited to reclassification of current deferred
tax liabilities and assets to non-current classification. Other
Business Considerations The transition to IFRS may also have an
impact on some contractual obligations. Management will have
more insight on the effects to other business considerations once
the full impact of transition has been quantified. SUMMARY OF
QUARTERLY RESULTS OF OPERATIONS The following table sets forth
unaudited information for each of the eight quarters ended December
31, 2008 through to September 30, 2010. This information has
been derived from our unaudited consolidated financial statements
which, in the opinion of management, have been prepared on a basis
consistent with the audited consolidated financial statements and
include all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of our financial
position and results of operations for those periods .
________________________________________________________________________
| |Sep 30|Jun 30|Mar 31 |Dec 31 |Sep 30|Jun 30|Mar 31| Dec 31 | | |
2010 | 2010 | 2010 | 2009 | 2009 | 2009 | 2009 | 2008 | | |$'000
|$'000 | $'000 | $'000 |$'000 |$'000 |$'000 | $'000 |
|____________|______|______|_______|_______|______|______|______|________|
|Gold sales |83,344|80,218|48,299 |66,849 |59,928|55,010|55,270|
47,845 |
|____________|______|______|_______|_______|______|______|______|________|
|EBITDA |42,608|39,169| 8,479 |28,237 |24,425|22,484|31,032| 24,294
| |(excluding | | | | | | | | | |undesignated| | | | | | | | |
|gain/(loss) | | | | | | | | | |on hedges) | | | | | | | | |
|____________|______|______|_______|_______|______|______|______|________|
|Earnings/ |13,683|7,968 |(9,547)|(4,151)|1,859 |5,397 |10,639|
1,917 | |(loss) after| | | | | | | | | |income tax | | | | | | | |
| |and before | | | | | | | | | |undesignated| | | | | | | | |
|gain/(loss) | | | | | | | | | |on hedges | | | | | | | | | |(net
of tax)| | | | | | | | |
|____________|______|______|_______|_______|______|______|______|________|
|Net |13,683|7,958 | 1,814 |(8,456)|13,800|40,114|9,054 |(13,426)|
|earnings/ | | | | | | | | | |(loss) | | | | | | | | |
|____________|______|______|_______|_______|______|______|______|________|
|Net earnings| | | | | | | | | |per share | | | | | | | | |
|____________|______|______|_______|_______|______|______|______|________|
|Basic |$0.06 |$0.03 | $0.01 |($0.05)|$0.08 |$0.25 |$0.06 |($0.08)
|
|____________|______|______|_______|_______|______|______|______|________|
|Diluted |$0.06 |$0.03 | $0.01 |($0.05)|$0.07 |$0.21 |$0.05
|($0.08) |
|____________|______|______|_______|_______|______|______|______|________|
The most significant factors causing variation in the results are
the commissioning of both the Reefton open pit and Frasers
underground mines, the variability in the grade of ore mined from
the Macraes open pit mine and variability of cash cost of sales due
to the timing of waste stripping activities. The volatility of the
gold price has a significant impact both in terms of its influence
upon gold sales revenue and its impact upon undesignated
gains/(losses) on hedges. Adding to the variation are the
large movements in foreign exchange rates between the USD and the
NZD. As noted in the December 2008 MD&A an adjustment in the
fourth quarter 2008 to the pre-stripping account is reflected in
the "December 2008" quarter above. If the adjustment is updated to
the quarter to which it relates there is an equal and offsetting
effect increasing Q2 2008 EBITDA by $4.9 million, earnings after
tax and net earnings by $3.4 million and earnings per share by
$0.02. This is considered a timing difference and therefore
not significant with the details and analysis provided above.
NON-GAAP MEASURES Throughout this document, we have provided
measures prepared according to Canadian generally accepted
accounting principles ("GAAP"), as well as some non-GAAP
performance measures. As non-GAAP performance measures do not have
any standardised meaning prescribed by GAAP, they are unlikely to
be comparable to similar measures presented by other companies. We
provide these non-GAAP measures as they are used by some investors
to evaluate OceanaGold's performance. Accordingly, such non-GAAP
measures are intended to provide additional information and should
not be considered in isolation, or a substitute for measures of
performance in accordance with GAAP. Earnings before interest, tax,
depreciation and amortisation (EBITDA) is one such non-GAAP measure
and a reconciliation of this measure to net earnings/(losses) is
provided on page 10. Cash and non cash costs per ounce are other
such non-GAAP measures and a reconciliation of these measures to
cost of sales, including depreciation and amortisation, is provided
on the next page.
___________________________________________________________________
| | Q3 | | | | | | |Sep 30| Q2 | Q3 |YTD Sep 30|YTD Sep 30| | |
2010 |Jun 30 2010|Sep 30 2009| 2010 | 2009 | | |$'000 | $'000 |
$'000 | $'000 | $'000 |
|______________|______|___________|___________|__________|__________|
|Cost of sales,|37,847| 37,560 | 32,972 | 110,770 | 86,770 |
|excluding | | | | | | |depreciation | | | | | | |and | | | | | |
|amortisation | | | | | |
|______________|______|___________|___________|__________|__________|
|Depreciation |17,832| 18,531 | 18,199 | 53,935 | 47,075 | |and | |
| | | | |amortisation | | | | | |
|______________|______|___________|___________|__________|__________|
|Total cost of |55,679| 56,091 | 51,171 | 164,705 | 133,845 |
|sales | | | | | |
|______________|______|___________|___________|__________|__________|
|Add sundry | 576 | 428 | 850 | 1,451 | 1,569 | |general & | |
| | | | |administration| | | | | | |adjustment | | | | | |
|______________|______|___________|___________|__________|__________|
|Add adjustment| 144 | 117 | (429) | 320 | (632) | |selling costs |
| | | | |
|______________|______|___________|___________|__________|__________|
|Total |56,399| 56,636 | 51,592 | 166,476 | 134,783 | |operating
cost| | | | | | |of sales | | | | | |
|______________|______|___________|___________|__________|__________|
|Gold Sales |67,672| 67,347 | 71,492 | 200,060 | 227,904 | |from
operating| | | | | | |mines (ounces)| | | | | |
|______________|______|___________|___________|__________|__________|
|Total | 834 | 841 | 722 | 832 | 592 | |Operating Cost| | | | | |
|($ per ounce) | | | | | |
|______________|______|___________|___________|__________|__________|
|Less Non-Cash | 266 | 277 | 249 | 271 | 204 | |Cost ($ per | | | |
| | |ounce) | | | | | |
|______________|______|___________|___________|__________|__________|
|Cash Operating| 568 | 564 | 473 | 561 | 388 | |Cost ($ per | | | |
| | |ounce) | | | | | |
|______________|______|___________|___________|__________|__________|
ADDITIONAL INFORMATION Additional information referring to the
Company, including the Company's Annual Information Form, is
available on SEDAR at www.sedar.com and the Company's website at
www.oceanagold.com. DISCLOSURE CONTROLS AND PROCEDURES The Chief
Executive Officer and Chief Financial Officer evaluated the
effectiveness of the Company's disclosure controls and procedures
as at June 30, 2010. Based on that evaluation, the Chief
Executive Officer and the Chief Financial Officer concluded that
the design and operation of these disclosure controls and
procedures were effective as at June 30, 2010 to provide reasonable
assurance that material information relating to the Company,
including its consolidated subsidiaries, would be made known to
them by others within those entities. INTERNAL CONTROL OVER
FINANCIAL REPORTING Management of OceanaGold, including the Chief
Executive Officer and Chief Financial Officer, have evaluated the
effectiveness of the design and operation of the Company's of the
internal controls over financial reporting and disclosure controls
and procedures as of June 30, 2010. Based on this evaluation, the
Chief Executive Officer and Chief Financial Officer have concluded
that they were effective at a reasonable assurance level. There
were no significant changes in the Company's internal controls, or
in other factors that could significantly affect those controls
subsequent to the date the Chief Executive Officer and Chief
Financial Officer completed their evaluation, nor were there any
significant deficiencies or material weaknesses in the Company's
internal controls requiring corrective actions. The Company's
management, including the Chief Executive Officer and the Chief
Financial Officer does not expect that its disclosure controls and
internal controls over financial reporting will prevent all errors
and fraud. A cost effective system of internal controls, no
matter how well conceived or operated, can provide only reasonable
not absolute, assurance that the objectives of the internal
controls over financial reporting are achieved Full Company Release
To view the full company release, including images please refer to
the company's website www.oceanagold.com To view this news release
in HTML formatting, please use the following URL:
http://www.newswire.ca/en/releases/archive/October2010/28/c6622.html
p/p pMr Darren Klinck/p pVice President, Corporate and Investor
Relations/p pTel: +61(3) 9656 5300/p
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