Didipio gold project cost estimate raised to $220M

OceanaGold Corp. on Monday raised its cost estimates for the development of the Didipio gold project in Nueva Vizcaya, as the Australian miner prepared to sign a $220-million credit facility.

The facility will be used to repay maturing bonds and secure a $50-million working capital line.

In a disclosure to the Australian Securities Exchange, OceanaGold said it had experienced some “cost pressure related to construction activities” at Didipio. As such, the cost for the project is seen reaching $220 million, or a 19-percent increase from the initial estimate of $185 million when the project started in June 2011.

“The main contributors to the increased capital cost are associated with increases in engineering design and procurement services, tailings storage facility and infrastructure construction, and site support costs,” the company disclosure stated.

As of June 30, OceanaGold said, about $161 million of the total project capital cost had been spent and a further $24 million had been committed in contracts. The company’s cash on hand had been $73 million as of June 30.

The project is currently at its peak construction phase and is on track for commissioning in the fourth quarter of 2012. It remains fully financed through to commercial production, the company said.

“The increased capital cost for the project is consistent with industry cost pressures today, particularly for engineering design services. We also made the very deliberate decision to engage with high quality contractors in the Philippines which cost more money to ensure the project was built to a high standard and on time,” OceanaGold managing director and CEO Mick Wilkes explained.

With the current cash position, cash flow from New Zealand operations in 2012, and the credit facility, the company is well positioned to meet its medium-term growth objectives, he said.—Riza T. Olchondra