Commissioning issues curbing production

PROBLEMS commissioning Oceana Gold’s new openpit Haile mine in South Carolina has revealed gold production in calendar 2017 could be down by as much as 40,000 ounces.

This week Oceana outlined a raft of issues at Haile with the commissioning of new equipment, which was delaying production. Remedial work was under way on the issues and would cost $US3 million$US4 million

($NZ4.1 million$NZ5.4 million).

Despite the South Carolina downturn, Oceana’s coppergold mine on the island of Luzon in the northern Philippines is expected to offset the Haile decline during calendar 2017, producing an extra 30,000oz40,000oz, to an upper estimate of 130,000oz.

With the Philippines boost, Craigs Investment Partners is expecting an overall 6% net earnings upgrade for the year to $US156 million.

Haile had been expected to contribute 150,000oz170,000oz this year, but that was downgraded to 110,000oz130,000oz by Oceana, while estimates of the upper end of overall production from all mines declined from 610,00oz to 600,000oz, which was still record production.

Craigs broker Peter McIntyre said many of the issues stemmed from design problems which Oceana would resolve during the next six months.

‘‘Plant rampup issues are common and Oceana has an excellent onsite technical team.

Oceana chief executive Mick Wilkes said while he was ‘‘disap pointed with the delay’’, he was confident staff would resolve the Haile plant issues and meet production and cost expectations, adding the Haile plant was already cash flow positive.

‘‘In the middle of the second quarter, some commissioning issues surfaced, leading to a shortfall in tonnes milled and recovery, as compared to the rampup plan,’’ Mr Wilkes said.

In his revised Haile guidance Mr Wilkes said with Oceana’s portfolio of four mines, Oceana had the flexibility to offset reduced production from one mine against another to achieve overall business results.

‘‘Increased production at Didipio [in the Philippines] will partially offset the decrease in production from Haile this year,’’ Mr Wilkes said.

The Craigs research outlined the Haile commissioning issues, which included tank delaminations, shortcircuiting of piping infrastructure, undersized pumps, suboptimal control systems and variable density affecting the fine-grinding circuit.

The Craigs research estimated that in calendar 2017 Oceana would produce a total of 570,000oz of gold, comprising 182,000oz from Macraes, in East Otago; 151,000oz from the Philippines; 125,000oz from Haile (a decrease of 2000oz on earlier estimates); and 111,000oz from Waihi, in the central North Island.

The Craigs research has Haile producing an estimated 260,000oz by 2019 against Macraes’ 148,000oz, the latter having been Oceana’s mainstay mine for the past 27 years.