OceanaGold Corporation (TSX & ASX: OGC)) has delivered another broad hint that the life span of its mainstay Macraes mine in East Otago has “many years” production left - as opposed to the formal mine life stated until 2021.
Macraes regularly tops the company's quarterly results for the amount of gold produced by its four mines, but with its low gold grades and more ore to process it has the highest, by far, production costs, which detracts from its profit margin.
Following $US5 million ($NZ7.63 M) spent on exploration drilling in the past 11-months, drilling results “exceeding our expectations” were this week released to market for the prospects Coronation North, Golden Point and Deepdell North areas, by OceanaGold chief executive Mick Wilkes.
“This (calendar) year at Macraes, production has been significantly higher than in previous years due to the discovery of higher grade ore from Coronation North,” he said.
Since November last year, OceanaGold had drilled 287 test holes, totalling 33.2 kilometres, mainly at Golden Point, Coronation North, Coronation, Deepdell North and its Frasers underground.
“I remain confident that the Macraes operation will be an important part of the OceanaGold business for many years to come,” he said.
The 28-year-old Macraes mine was OceanaGold's first, and also now also has operations in Waihi in the central North island, the northern Philippines and South Carolina in the US.
Macraes, which employs around 650 people, had a seven year mine life in 1990, two-years in 2007, and a reported four years in 2013.
Historically, the Macraes operation annually runs on recovering 1 gram/tonne of gold (g/t) of ore from its pit operations, and around 2 g/t from its Frasers underground tunnel.
Of 27 test hole results released this week, the top three highlighted by Wilkes were: 49 metres grading 5.05 g/t; 25m @ 4.83 g/t; and 38m @ 2.99 g/t gold.
“The latest drill results have exceeded our expectations and we seek to leverage those results into tangible resource growth,” Wilkes said.
Wilkes the company had been working on a new mine plan, focussed on extraction or ore located within existing deposits.
“This work, coupled with the exploration success indicate the potential for a profitable mine life extension beyond 2021, at today's gold price,” he said.
Separately, OceanaGold was still investigating the technical and economic viability of its Round Hill project at Macraes, which meant a “potential redevelopment” of Macraes which Wilkes said could add an incremental 10-years of mine life to operations.
This calendar year the company expects to produce between 500,000 and 540,000 oz of gold from all its four mines, plus up to 16,000 tonnes of copper from its gold-copper mine in the Philippines.
*Simon Hartley is senior business writer and assistant chief reporter for the Otago Daily Times.