OceanaGold Corporation has signed a non-binding Letter of Intent (LoI) with Newmont Mining Corporation to acquire Newmont’s Waihi Gold Mine for US$101 million in cash plus customary adjustments. Newmont will also retain a 1% Net Smelter Royalty for gold ounces mined from one specific exploration tenement capped at 300,000 ounces of production.
OceanaGold’s managing director and CEO Mick Wilkes says, “We have long believed that Waihi represents a strong strategic fit within OceanaGold. We are excited about the prospect of acquiring it and welcoming its experienced workforce to our team.
"Waihi represents a unique opportunity for us to acquire a high-quality asset that has demonstrated the propensity to extend mine life for more than two decades in what is still a very prospective, high-quality goldfield. “This proposed acquisition is accretive to shareholders, grows our production profile and importantly will further reduce our industry leading All-In Sustaining Cost (AISC) profile.”
The company expects that the high-grade and low-cost operation will contribute meaningful gold production while substantial free cash flow generation is anticipated to result in a rapid payback on investment. Significant opportunities also exist to extend mine life through exploration and development, as demonstrated by the performance over 27 years operating in this highly prospective goldfield.
The Waihi mine is about 150km southeast of Auckland with the open pit mine operating since 1988 and the underground operations since 2005. The Correnso underground mine is now in operation and is expected to produce on average 100,000 ounces per annum through to 2018. There are reserves of 2 million tonnes @ 5.52 grams/tonne gold for about 360,000 ounces. There is a conventional SAG mill, ball mill and CIP circuit, with annual plant capacity of up to 1.3 million tonnes.
Pursuant to the LoI, Newmont has granted OceanaGold an exclusivity period until June 1, 2015 for OceanaGold to complete its due diligence review and for Newmont and OceanaGold to execute a definitive acquisition agreement.
Mick Wilkes says, “We recently announced a mine life extension to the Frasers Underground Mine which combined with a weaker New Zealand dollar and lower fuel prices has enhanced the value of our Macraes operations. We are investing in exploration along strike and underground at Macraes and believe there is good potential to underpin 3 to 5 years of steady operations producing around 150,000 ounces of gold per annum while generating material free cash flow. This combined with the proposed Waihi transaction creates an attractive and profitable gold business in New Zealand that we believe will generate strong returns for years to come.”
OceanaGold is a significant multinational gold producer with mines on the South Island of New Zealand and in the Philippines. The company’s assets encompass New Zealand’s largest gold mining operation at the Macraes goldfield in Otago which is made up of the Macraes Open Pit and the Frasers Underground mines. Additionally, on the west coast of the South Island, it operates the Reefton Open Pit mine.
The Didipio Mine in northern Luzon, Philippines commenced commercial production on April 1, 2013 and is expected to produce 100,000 ounces of gold and 14,000 tonnes of copper per year on average over the next 15 years.
In 2015, the company expects to produce 295,000 to 335,000 ounces of gold from the combined New Zealand (excluding Waihi) and Philippine operations and 21,000 to 23,000 tonnes of copper from the Philippine operations.