Stocks To Watch

Wednesday,30 July,2014

OceanaGold Copper and Gold Production Slides in Second Quarter


The Canadian markets are alive with earnings reports on Wednesday ahead of the key report on second quarter gross domestic product from Statistics Canada tomorrow. Canadians will be hoping to see that their economy grew alongside the U.S. economy, which a report from Washington D.C. showed expanded by a 4% annual rate in the second quarter after contracting by a revised 2.1% in the first quarter. The acceleration is weighing on gold prices, as the U.S. Federal Reserve said it is further reducing its stimulus package. The resource heavy Toronto exchanges are ignoring slipping bullion and pushing onward, with the Composite on pace for another record close.

Shares of OceanaGold Corp. (TSX:OGC) are not joining in the fun, edging lower after the multi-national gold producer released its quarterly report showing it swung to a net loss in the second quarter after a profitable first quarter. Oceana has mines in the Philippines and on the South Island of New Zealand. The New Zealand assets are the largest gold mining operation in country and include Macraes (open pit) and Frasers (underground) mines in Otago and the Reefton (open pit) mine. In the Philippines, Oceana brought its open-pit Didipio mine in Luzon to commercial production last April.

Gold production at Didipio rose to 17,746 ounces in the second quarter from 11,086 ounces in the same quarter during 2013. Copper production was up modestly from 5,073 tonnes to 5,173 tonnes. OceanaGold previously warned that production was going to be down from the first quarter (36,264 ounces gold, 7,752 tonnes copper) because of lower grades or processed ore and lower mill feed at Didipio. In the second half of 2014, the company expects a higher grade of ore at the mine.

In New Zealand, cumulative gold production totaled 46,045 ounces of gold and 602,092 tonnes of copper. This was substantially lower than the year prior quarter’s totals of 54,677 ounces of gold and 1.79 million ounces of copper and well below the first quarter as well (56,088 ounces gold, 1.75 million ounces copper).

All tallied, total revenue for OceanaGold in the second quarter was $127.48 million, compared to $131.21 million in the second quarter of 2013. Net loss, which was weighed down in part by a higher cost of sales and higher New Zealand dollar, was $2.12 million, or one cent per share, versus a net loss of $70.49 million, or 24 cents per share in the year prior quarter. From that perspective, it was a better quarter. Investors seem focused on the first quarter comparison, though, when the company notched $170.355 million in revenue and a net profit of $58.95 million, or 20 cents per share.

Looking at the first half of 2014, revenue was $297.84 million, up 31 percent from $226.85 million in the first half last year. OceanaGold swung to a profit in the first six months of the year of $60.86 million, or 19 cents per share, from a loss of $63.43 million, or 22 cents a year, in the same period in 2013.

Expecting the rough patch in the second quarter, OceanaGold says it is still on schedule to meet its outlook for 2014, maintaining its guidance at 275,000 to 305,000 ounces of gold and 21,000 to 24,000 tonnes of copper at cash costs of $400 to $450 per ounce and AISC of $750 to $850 per ounce both net of by-product credits.

Shares of OGC have been stellar so far this year, rising nearly 130% from $1.65 to a high last week of $3.74. Slumping gold prices, likely some profit taking and the soft quarter has the stock backpedalling the past two days, including trading down by 6.7 percent on Wednesday at $3.22 as the day winds to a close.

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