OceanaGold cuts projected life of Didipio mine to 16 years

MANILA, Philippines - OceanaGold Corp. has decided to cut the projected life of its Didipio copper-gold mine from 20 years to just 16 years even as the company announced that it has started construction activities at the project site in Nueva Vizcaya.

In simultaneous disclosures to the Australian, Toronto and New Zealand Stock Exchanges, OceanaGold said it has commenced and will progressively ramp up in the coming weeks construction activities.

OceanaGold said the project, “shows strong economics with cash costs for the first six years averaging negative $79/oz (net of biproduct credits using $3/lb of copper). Gold and copper reserves have increased significantly along with average annual gold production which is now 100,000 ounces per annum.”

According to OceanaGold, the minilife revealed, has been shortened to 16 years ( from the original projection of 20) with the open pit operating throughout, and the underground operation expected to commence production in 2020.

The Australian-listed mining firm said that its board has formally approved the remaining capital expenditure to complete development of the Didipio project.

OceanaGold chief executive Mike Wilkes had said that company would spend $140 million to complete the Didipio project, on top of the $80 million it has already spent for partial construction.

In their disclosure, Wilkes said “we are very pleased to have commenced construction that will see commissioning on schedule in the fourth quarter 2012. Over the past six months we have been working hard to unlock significant value through adjustments to the design of the mine, process plant and infrastructure which has seen average annual gold production increase by 45 percent and average annual copper production increase by 69 percent over the life of the mine.”

Wilkes said, “this robust project will be transformational for OceanaGold and give us a significant platform to expand further into the Philippines and throughout Asia Pacific.”

The Didipio project is expected to produce annually an average of 100,000 ounces of gold and 14,000 tons of copper at cash costs of $356/oz gold (net of bi product credits at $3/lb copper).

For the first six years of operations, gold production will be approximately 100,000 ounces per annum.

However, with higher annual copper production of 18,000 tons per annum, cash costs will average negative $79/oz (net of bi product credits) over the same period.

The project, according to OceanaGold, demonstrates an internal rate of return of 48 percent at spot metals prices.