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OceanaGold posts first-half profit on strong first-quarter

OceanaGold [NZX: OGC], which operates the Macraes goldfield in Otago, posted a first-half profit as its Didipio operation in the Philippines helped lift first-quarter earnings to a record, making up for a small loss in the second quarter blamed on higher New Zealand costs and weaker sales.

Net profit was US$56.8 million in the six months ended June 30, from a year-earlier loss of US$63 million, which included some of 2013's US$193.3 million of impairments against its New Zealand assets, the Melbourne-based company said in a statement. Sales rose to US$297.8 million from US$226.9 million a year earlier, it said.

The mining company achieved a profit of US$58.9 million in the first three months of the year as production from Didipio came onstream, lifting sales by 78 percent. In the second quarter, sales fell 2.7 percent to US$127 million and were eclipsed by cost of sales, depreciation and amortisation, and other expenses amounting to about US$129 million.

OceanaGold attributed the second-quarter loss to "lower revenue from lower overall sales and higher costs in New Zealand due to a higher New Zealand dollar and a drawdown of inventory and gold-in-circuit."

"We had a strong start to the first half of the year with free cash flow generation of US$71 million including US$22 million in the second quarter despite a lower quarter for production," said chief executive Mick Wilkes. The company was on track to achieve its 2014 guidance, he said.

The shares fell 8.2 percent to $3.58 on the NZX and have surged 128 percent this year. In that time the spot price of gold has gained about 16 percent.

Total production in the first half was 147,399 ounces of gold and 11,185 tonnes of copper including 60,831 ounces of gold and 4,706 tonnes of copper in the second quarter.

The Didipio operation produced 45,266 ounces of gold and 11,185 tonnes of copper in the first half, with much of the output achieved in the first quarter of the year, the company said. Production was expected to be lower in the second quarter because of the timing of extraction of lower grade ore and maintenance and is expected to pick up in the third quarter, it said.

In New Zealand, gold production was 102,133 ounces in the first half, down from 115,263 ounces a year earlier. That mainly reflected a decline in the second quarter of the latest year, which the company said was due to "lower grade ore mined and processed across the New Zealand operations and to lower mill feed at Reefton." Less ore was mined at Reefton towards the end of the second quarter because instability of a pit wall temporarily affected access, it said.

"Reduced ore feed will continue in the third quarter while an alternate access in the open pit is established," the company said. "As a result, production at Reefton for the third quarter and full year will be lower than expected."

(BusinessDesk)