Spot gold prices floating around the $1,200 U.S. per ounce price point and increasing production costs are putting pressure on miners profit margins. Gold prices softened again on Wednesday and Thursday following the U.S> Federal Open Market Committee announcement that it is bringing to an end this month its asset purchase program, which had been tapered throughout 2014 from $85 billion U.S. per month to $15 billion U.S. in October.
Spot gold slipped 1.3% on Wednesday and slipped below $1,200 U.S. on Thursday, taking the precious yellow metal back near four-year lows. With that, gold plays continue to remain unloved, but that doesn’t mean bargain hunting investors aren’t culling through reports looking for profitable companies in the often volatile industry.
Multinational gold and copper producer OceanaGold Corp. (TSX:OGC) is New Zealand’s largest gold producer with its gold operation at the Macraes Goldfield and the Reefton Gold Mine on the west coast. To the northwest, the company’s flagship property is the Didipio Mine in the Philippines. Didipio commenced production in April 2013 and has a current mine life to 2029.
OceanaGold released its third quarter and year-to-date financial and operating results early Thursday morning showing increasing production that has the company on pace to top its full-year production and cost guidance.
Production at Didipio in the third quarter, ended September 30, was 26,207 ounces of gold and 7,078 tonnes of copper, up significantly from 18,011 ounces of gold and 6,150 tonnes of copper in the year-prior quarter. From January 1 through September 30 this year, production at Didipio has totaled 71,473 ounces of gold and 18,263 tonnes of copper, versus 38,564 ounces of gold and 15,523 tonnes of copper in the period last year.
Consolidation production from its mines was 67,352 ounces of gold and 7,078 tonnes of copper in the third quarter. Year-to-date production was 214,751 ounces of gold and 18,263 tonnes of copper. This compares to 210,513 ounces of gold and 15,523 tonnes of copper in the first nine months of 2013.
OceanaGold previously guided production of 275,000 to 305,000 ounces of gold from the combined New Zealand and Philippine operations and 21,000 to 24,000 tonnes of copper from the Philippine operations.
"Looking ahead, the Company is well on track to achieve its full year production and cost guidance. We expect a strong finish to the year where we further strengthen the balance sheet with increased cash and repayment of an additional $30 million in debt,” said Mick Wilkes, Managing Director and CEO, in a statement today.
Revenue for the third quarter was $122.84 million, down from $156.62 million in the same quarter last year. Net profit was $16.88 million, or six cents per basic share, in the recent quarter, down from $43.74 million, or 14 cents per share, in Q3 2013. The upside to the lower earnings is that OceanaGold swung back into the black after recording a net loss of $2.1 million in the second quarter.
At the end of the third quarter, the company had a cash balance of $46.8 million.
Between the pressure on the overall metal markets and the drop-off from the year prior quarter comparables, Bay Street isn’t reacting favorably to OceanaGold’s report today. As the day wound to a close, shares were down by 8.2% at $2.02, marking the eighth straight red day and lowest level for the stock since early in February after hitting a 52-week high of $3.74 in July.
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