OceanaGold (OGC.TO, ASX:OGC) has released its production and cost guidance for 2015, and as expected there aren’t really any surprises in the update. The total gold production is expected to be 295-335,000 ounces with an additional production of 46-60 million pounds of copper (coming from its Didipio mine in the Philippines). The AISC is expected to be $770-840 on a consolidated level.
Didipio will once again be the company’s main project as it’s expected to produce 100-120,000 ounces of gold at an all-in sustaining cost of around zero, resulting in a free cash flow of $110-140M. This would be a much better performance compared to the gold mining operations in New Zealand which will produce around 200,000 ounces of gold at an AISC of $1200-1250/oz which means the project will very likely lose money. However, there are many more stakeholders than just shareholders, and as long as the difference between the AISC and received price per ounce remains quite small, OceanaGold will keep the mines open and its employees at work (except at Reefton which is expected to be placed on care and maintenance).
2016 should be even better as OceanaGold will develop a decline to access the very high-grade orebodies at Didipio and the connection to the local power grid will further reduce Didipio’s operating costs. We wouldn’t be surprised to see Didipio’s gold being produced at a negative AISC in 2016.
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Disclosure: The author holds no positionin OceanaGold. Please see our disclaimer for current positions.
