OceanaGold Corp Rebounds Upon Extending Mine Life (ASX:OGC)

OceanaGold Corp Rebounds Upon Extending Mine Life (ASX:OGC)

The dual-listed OceanaGold Corp Ltd [ASX:OGC] [TSX:OGC] has seen its share price rise today upon receipt of permits for its Macraes mine life extension.

The OGC share price has been in steep decline sine the end of July, pushed down by disappointing quarterly results, declining ore grade, and poor free cash flow.

OceanaGold Share Price Chart - ASX OGC

Source: Tradingview

However, with the receipt for permits to extend the mine life at the New Zealand-based Macraes mine, OGC’s poor financial performance could soon turn around.

At time of writing the OGC share price is up 6.48% or 11.5 cents to trade at $1.89 per share.

Macraes good until 2028

In a statement released this morning, OGC said it had received permits for the Golden Point Underground Mine, Deepdell North Stage III open pit extension, and the Frasers West expansion.

The newly acquired permits will allow the miner to proceed with the development of new and extended open pit and underground mining opportunities at Macraes.

With the projects expected to extend the mine life of the Macraes operation to 2028.

CEO of OceanaGold Michael Holmes said:

Collectively, these projects are forecasted to produce 1.1 million ounces of gold over an eight-year mine life. Open pit and underground operations are expected to produce on average 150,000 to 170,000 ounces of gold per year at All-in Sustaining Costs of around $1,000 per ounce…

The production outlook is a slight increase to OGC’s current 2020 guidance of 140,000–150,000 ounces provided in July.

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Although that guidance was updated to 135,000–175,000 ounces during the third quarter of CY2020.

Regardless of OGC’s production outlook, the company has no NZD gold hedges in place beyond 2020, hoping to take advantage of the high gold price to boost free cash flow beyond 2021.

Will this mean a return in the share price?

It has been a disappointing year for OGC shareholders, with the gold producer only briefly able to capitalise on the historically high gold prices.

So, your outlook on where the OGC share price is heading will depend on your sentiment for the gold price.

If you’re unsure where the gold price is heading, check out these two articles (here and here), they breakdown what the future of gold could look like — hint: it is looking positive.

In my opinion, if OGC’s economics improve and their AISC fall to US$1,000 per ounce (down from US$1,695 currently), then the share price could see some decent uplift.

However, I would be wary of their negative earnings, for a gold producer to be losing cash in a favourable gold market is a bit worrisome.

If you want to learn more about the future of gold, then check out this exclusive interview from The Daily Reckoning Australia: ‘The New Case for Gold: An Interview with Bestselling Author and Wall Street Insider, Jim Rickards’. Click here to learn more.


Lachlann Tierney

For The Daily Reckoning Australia