68
OceanaGold Corporation Annual Report 2007
OceanaGold Corporation Annual Report 2007
www.oceanagold.com
OceanaG
old C
orporation A
nnual Rep
ort 2007
Delivering on sustainable growth
OceanaGold Corporation
Directors
James E Askew (Chairman)
T Kerry McDonald
Terrence N Fern
Jose P Leviste Jr.
J Denham Shale
Stephen A Orr
Company Secretary
Matthew Salthouse
Registered Office
Fasken Martineau DuMoulin LLP
2900 – 550 Burrard Street
Vancouver, British Columbia V6C OA3
Canada
Share Registries
Canada
Computershare Investor Services
3rd Floor, 510 Burrard Street
Vancouver, British Columbia V6C 3B9
Canada
T: +1 604 661 9400
F: +1 604 661 9549
Australia
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford, Victoria 3067, Australia
T: +61 3 9415 4000
F: +61 3 9473 2500
New Zealand
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 1309, New Zealand
T: +64 9 488 8700
F: +64 9 488 8787
Auditors
Ernst & Young
Chartered Accountants
8 Exhibition Street
Melbourne, Victoria 3000, Australia
T: +61 3 9288 8000
Stock Exchanges
Canada
Toronto Stock Exchange
3rd Floor, 130 King Street W.
Toronto, Ontario M5X 1J2
Trading code ordinary shares: OGC
Australia
Australian Stock Exchange Limited
Level 4, Stock Exchange Centre
20 Bridge Street, Sydney
New South Wales 2000, Australia
Trading code ordinary shares: OGC
Trading code listed options: OGCO
New Zealand
New Zealand Stock Exchange
ASB tower, 2 Hunter Street
Wellington, New Zealand
Trading code ordinary shares: OGC
Website
www.oceanagold.com
Investor Relations
T: +61 3 9656 5300
GlossaryA ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.
A ‘Mineral Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
Cautionary Statements Regarding Forward-Looking Information This Annual Report contains “forward-looking information” within the meaning of applicable securities laws which may include, but is not limited to, statements with respect to the future financial and operating performance of the company, its subsidiaries and affiliated companies, its mining projects, the future price of gold, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and resource estimates, costs of production, estimates of initial capital, sustaining capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of the development of new mines, costs and timing of future exploration, requirements for additional capital, governmental regulation of mining operations and exploration operations, timing and receipt of approvals, consents and permits under applicable mineral legislation, environmental risks, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “targets”, “aims”, “anticipates” or “believes” or variations (including negative variations) of such words and phrases, or may be identified by statements to the effect that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company and/or its subsidiaries and/or its affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, future prices of gold; general business, economic, competitive, political and social uncertainties; the actual results of current production, development and/or exploration activities; conclusions of economic evaluations and studies; fluctuations in the value of the United States dollar relative to the Canadian dollar, the Australian dollar or the New Zealand dollar; changes in project parameters as plans continue to be refined; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability or insurrection or war; labour force availability and turnover; delays in obtaining financing or governmental approvals or in the completion of development or construction activities or in the commencement of operations; as well as those factors discussed in the section entitled “Risk Factors” in the company’s Annual Information Form in respect of its year ending December 31, 2007 filed with Canadian securities regulatory authorities. Although the company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this Annual Report and, subject to applicable securities laws, the company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.
Shareholder Information continued
(e) Top Twenty Listed Option holders
The names of the 20 largest holders of listed options as at
10 March 2008 are listed below:
Fully Paid Ordinary Shares
Rank Name Number %
1ANZ Nominees Limited (Cash Income A/C)
4,184,468 13.80
2 JP Morgan Nominees Australia 4,018,228 13.25
3HSBC Custody Nominees (Australia) Limited – GSI ECSA
1,913,302 6.31
4 Citicorp Nominees Pty Limited 1,723,219 5.68
5HSBC Custody Nominees (Australia) Limited – A/C 3
1,466,740 4.84
6 National Nominees Limited 1,346,931 4.44
7HSBC Custody Nominees (Australia) Limited
1,336,061 4.41
8 Citicorp Nominees Pty Limited 1,174,840 3.879 LIPPO Securities Nominees (BVI) Ltd 1,082,809 3.5710 HESTIAN Pty Ltd 839,355 2.77
11TEMPIO Group of Companies Limited
818,400 2.70
12 C/- SUITE 701 7th Floor 771,427 2.5413 Den Duyts Corporation Pty Ltd 693,372 2.29
14ANZ Nominees Limited (SL Cash Income 4SF A/C)
677,827 2.24
15HSBC Custody Nominees (Australia) Limited – A/C 2
399,604 1.32
16 Ms Lorraine Beryl Johnson 326,970 1.0817 MINJELA Pty Ltd 300,000 0.99
18HSBC Custody Nominees (Australia) Limited – GSCO ECA
252,769 0.83
19 Mr Robert Peter Thomson 247,360 0.82
20Merrill Lynch (Australia) Nominees Pty Limited
233,944 0.77
23,807,626 78.52
Designed by Value Added Design, Australia Printed by John Herrod and Associates, Australia
ProfileOceanaGold Corporation (OceanaGold) is a significant
Pacific Rim Gold producer, with assets on the South Island of
New Zealand and in the Philippines.
To date, OceanaGold has been best known for operating
New Zealand’s largest gold mine – Macraes. However, in the
last two years the company has commissioned an additional
two new mines in New Zealand, and the future looks even
brighter. In 2009 OceanaGold’s fourth mine, the Didipio Gold
Copper Project will commission, increasing production to
approximately 500,000 gold equivalent ounces per annum,
and will firmly entrench the company as one of the premier
gold growth stories out of the Pacific Rim.
OceanaGold is listed on the Toronto, Australian and New
Zealand stock exchanges under the stock code OGC.
OceanaGold Corporation Corporate Office Level 5, 250 Collins Street
Melbourne, Victoria, 3000 Australia
PO Box 355, Flinders Lane PO
Melbourne, Victoria, 3000 Australia
T: +61 3 9656 5300
F: +61 3 9656 5333
www.oceanagold.com
Increased sales 10%
Commissioned Reefton mine
Listed on Toronto Stock Exchange
Produced 183,209 gold oz
Increased activity at Didipio
Results
Delivering on sustainable growth
“OceanaGold’s strategy is simple: maximise shareholder value and
build a sustainable, profitable international gold company.”
Steve Orr Chief Executive Officer
Contents2 Chairman and CEO’s Review
6 Financial Analysis
8 Assets at a Glance
10 Operations
12 Development
14 Exploration
18 Resources and Reserves
20 Sustainability
34 Our People
37 Corporate Governance
41 Financial Statements
64 Shareholder Information
IBC Glossary
1OGC/AR/07
Review
Chairman and CEO’s Review
We have continued to deliver growth in gold production and will continue this in 2008 with Reefton and Frasers Underground now producing in New Zealand.
2OGC/AR/07
OceanaGold’s Chief Executive Officer, Steve Orr and Chairman, Jim Askew at the Toronto Stock Exchange, Canada. OceanaGold listed on the TSX on 27 June 2007.
3OGC/AR/07
With the Didipio Gold and Copper Project on track to reach
production in the first half of 2009, the Company is set to
increase production to approximately 500,000 gold equivalent
ounces per annum.
Sustainable Development Our commitment to
environmental, social and economic sustainability is paramount
across all our operating, development and exploration sites.
During 2007 we reviewed and updated our corporate
environmental policy and site procedures to minimise the
on- and off-site impacts at the exploration, development,
operation and closure stages of the mining process. These
enhancements have been adopted at all sites.
We also assessed our community engagement and development
processes to ensure that there is active engagement and
positive contribution to the communities in which we operate.
During the year, there were some factually incorrect reports
made by third parties misrepresenting our position and level of
support for the Didipio project by the Didipio Valley community.
OceanaGold has extensive local community support for the
project. Since acquiring Didipio just over one year ago, we
have made improvements in social infrastructure, livelihood
and economic development a priority. We encourage you to
read the “Towards Sustainability” section of this annual report
for detail of our community work in the Didipio Valley. The
Company also enjoys strong regional and federal government
support for the development.
A Year of Development 2007 has been a year of
unprecedented growth for OceanaGold Corporation and
moves the Company towards our objectives of joining the
mid-tier international gold producers by 2009. To that end,
we delivered on a number of challenging targets during 2007:
Our new mine: The Reefton Gold Project was
commissioned in 2007 and became OceanaGold’s second
operating mine.
Development completed for a further mine: By
year-end 2007, OceanaGold began commissioning the
Frasers Underground Project, bringing the Company’s
total number of operating mines to three.
Listing on the Toronto Stock Exchange (TSX):
OceanaGold successfully listed on the TSX on 27 June
2007. The Company is now listed on the Toronto, Australian
and New Zealand stock exchanges.
Financing: Over the course of the year the Company
successfully raised C$100 million in conjunction with
its initial public offering in June on the TSX, and earlier
in the first quarter of 2007 completed a A$100 million
convertible debt offering. The majority of the proceeds
were allocated to fund capital projects related to bring
on new gold production including the Didipio Project in
Luzon, Philippines which is currently under construction.
The remainder went to general working capital purposes.
Chairman and CEO’s Review continued
Our commitment to the communities in which we operate
is consistent across all our projects in the Philippines
and New Zealand. During 2007 OceanaGold funded vital
community development projects in the Philippines which
included the building and upgrading of roads and local
school infrastructure; providing high school and university
scholarships; and implementing health monitoring and
assistance programs.
Results from Operations Following a strong fourth
quarter, the Company achieved gold production of 183,209
ounces in 2007; a slight increase over the previous year’s total.
With a significant rise in the average gold price received,
revenue increased by 10% over the previous year.
While cash costs were higher on account of lower grade
stockpiles being processed at Macraes and a slower than
anticipated ramp-up of the new Reefton mine, increased gold
prices delivered a higher cash operating margin of $141 per
ounce compared to $123 per ounce in 2006.
Board of Directors In December of 2007, we appointed
Mr Jose (Joey) P. Leviste Jr. to the Board of OceanaGold
Corporation. Joey is the Chairman of OceanaGold
(Philippines), Inc. He has been a director of the Philippines
Company since our merger with Climax Mining in 2006.
We would like to take this opportunity to thank Antenor Silva
for his valuable contributions as a member of the Board of
directors. Antenor, who resigned in December, joined the
Board in November 2006 at the time of the merger with Climax.
Management During 2007 we made some additions to the
senior management team. In April, Darren Klinck joined us
as Vice President, Corporate and Investor Relations. Darren
previously held the same role at Kimber Resources, Inc., an
American and Toronto listed gold and silver development
company. In the same month, Patrick Goodfellow became
Vice President, Philippines. Patrick has over 29 years
experience in the mining industry, most recently as Oxiana’s
Project Manager - Primary Gold for the Sepon Mine in Laos.
In January 2008, Matthew Salthouse joined OceanaGold as
Company Secretary and Legal Counsel. Matthew has worked
as a commercial lawyer and legal practitioner at Coles Myer,
ION Limited and Corrs Chambers Westgarth
OceanaGold’s second operating mine at Reefton reached planned production rates on 1 October 2007.
4OGC/AR/07
Gold Price The gold price continued to strengthen
throughout 2007 reaching over US$830 per ounce by the
end of the year; a number which has since been eclipsed in
2008. There have been multiple factors that have contributed
to and, we believe, will continue to support a strengthening
gold price. It is apparent that the United States is entering a
period of recession and the resulting jittery US equity market
has provided support to gold as a safe haven investment
alternative. This has been compounded by political
uncertainty in a number of regions throughout the world.
These issues are occurring at a time when gold production
is declining. A paucity of new gold deposit discoveries and
near-term depletion of many existing deposits is constraining
supply despite unprecedented demand.
We do not anticipate that these supply and demand
fundamentals will change soon and expect there to be
strong support for gold over the next few years.
Delivering on our Strategy OceanaGold expects another
year of solid growth in 2008. With three operating mines and
a fourth on schedule to commission in 2009, the Company is
delivering on its commitment to create a sustainable mid-tier
gold company with an Australasian focus.
On behalf of the Board, we would like to thank our employees,
existing and new shareholders and our expanding number
of stakeholders for their commitment to OceanaGold.
We look forward to growing the Company with you over
the next two years. We are confident that OceanaGold will
emerge as one of the premier gold growth stories of the
Pacific Rim.
James Askew
Chairman
Stephen Orr
Chief Executive Officer
5OGC/AR/07
Record
Financial Analysis
6OGC/AR/07
Results from Operations The completion of the
overburden removal campaign and a pit redesign at the
Macraes open pit in the third quarter resulted in a significant
increase in mill grades in the fourth quarter. This, combined
with improved performance at the Reefton mine contributed
to a strong finish to the year resulting in total gold production
in 2007 of 183,209 gold ounces, exceeding 2006 gold
production of 182,288 ounces
Gold sales volume for the year was 177,722 ounces compared
to sales volume of 180,035 ounces in 2006. 28,015 ounces
were produced from the Frasers Underground development
and credited to the project cost.
The impact of the lower sales volume was more than offset
by a significant rise in the average gold price received
per ounce. This increased 33% to $697 for the year due to
a combination of continued higher gold spot prices, the
continued benefits of the hedge restructure completed in
2006, and the positive impact of the gold put options. As a
result gold sales revenue for the year exceeded that of 2006.
Reduced production due to lower grade ore mined in the early
phases of the Frasers Stage 4 pit at the Macraes mine, together
with a slower than expected ramp up at the Reefton open pit
mine impacted on cash costs for the year. Despite a better
than forecast cost performance in the fourth quarter, the full
year’s cost result was higher than 2006 at $556 per ounce.
The increased gold prices and sales revenue more than
offset the increased cash costs per ounce and delivered
significantly higher cash operating margins of $141 per
ounce in the year, compared to $123 per ounce for 2006.
Cashflow Cash inflows from operating activities were $10.7
million in 2007, $5.4 million lower than 2006 primarily as a
result of increased mining costs and an increase in debt interest
payments, partially offset by increased gold sales revenue.
Profit The Company reported a loss after income tax and
before unrealised gains and losses on hedges in 2007 of
$25.5 million compared to $1.5 million in 2006.
This came about as a result of reduced production from the
Macraes open pit mine, the slower than expected ramp up at
Reefton, increased costs associated with the commencement of
operations at Reefton, increased depreciation and amortisation
expenses associated with the start at Reefton, amortisation of
capitalised stripping costs, increased interest costs associated
with higher levels of debt and an unrealised foreign exchange
loss on cash holdings. The additional costs were countered by
a 33% increase in the average gold price received.
In addition, unrealised hedge losses recorded in the
Statement of Earnings/(Loss) were $62.3 million compared
with $32.8 million in 2006 and resulted in the Company
reporting a loss after income tax of $69.0 million.
Table 1
Financial Statistics
Year Ended 31 Dec 2007
US$’000
Year Ended 31 Dec 2006
US$’000
Gold produced (ounces) 183,209 182,288Gold sales (ounces) 177,722 180,035
US$’000 US$’000Average price received ($ per ounce) 697 526Cash operating costCash cost ($ per ounce) 556 404Total cash operating cost ($ per ounce) 746 482Non-cash cost ($ per ounce) 190 78Gross cash operating margin ($ per ounce) 141 123Total cash operating cost ($ per tonne) 13.50 13.18
Table 2
Record
Cash inflows from financing activities in the year were
$140.8 million compared to an inflow of $74.4 million in
2006. This was primarily due to $85.4 million in net proceeds
from the TSX IPO completed in July and the issuance of an
additional A$30 million of convertible notes in March.
Capital expenditure in the year totalled $118.7 million.
$38.3 million was incurred on the development of the Reefton
open pit and Frasers Underground mines, $25 million on
the development of the Didipio Project, and $55.4 million on
pre-stripping and sustaining activities, exploration, and the
expansion of the mining fleet.
The net cash inflow of the company for the 2007 year was
$32.8 million compared with $40.9 million in 2006.
Funding and Capital Requirements The Company
expects to continue to fund its planned growth and
development through a combination of the cash balance
as at December 31, 2007 of $119.8 million, cash flow from
operations (including sales through derivative instruments),
from various financing facilities, from the exercise of listed
share options, or from the capital markets.
The Company’s principal requirements for cash over the next
twelve months will be for the development of the Didipio
Project in the Philippines.
During 2007 an extraordinary general meeting of
shareholders was held in the first quarter which approved
the Company’s issue of A$100 million in convertible notes in
December 2006 and March 2007.
The Company subsequently completed a TSX initial public
offering (IPO) on July 5, 2007. The IPO raised C$90,002,500
from the issue of 25,715,000 common shares at C$3.50
per share. On July 25, 2007 the syndicate of underwriters
exercised their over-allotment option which raised an
additional C$10,710,000 from the issue of 3,060,000
common shares at C$3.50 per share.
7OGC/AR/07
Results Summary
Year Ended 31 Dec 2007
US$’000
Year Ended 31 Dec 2006
US$’000
As reported in financial statementsSales revenue 104,395 94,750Operating Profit/(loss) (34,0103) (25,555)Profit/(loss) before income tax (95,022) (34,768)Profit/(loss) after income tax (69,039) (23,427)Excluding unrealised hedge gains/(losses)Sales revenue 104,395 94750Operating profit/(loss) (17,696) 2,129Profit/(loss) before income tax (32,768) (2,005)Profit/(loss) after income tax (25,461) (1,476)
8OGC/AR/07
Assets at a Glance Macraes Gold Project The Macraes Project is located 100
kilometres by road, north of Dunedin in the Otago region of
the South Island of New Zealand. It consists of the Macraes
open cut gold mine and the Frasers Underground mine, as
well as an adjacent processing plant and pressure oxidation
facility (autoclave), which treats refractory ore and is one of
only three in the southern hemisphere. The Macraes mine
has been in operation since 1990 and has produced over 2.5
million ounces of gold to date.
The combined open cut and underground mine mineral
reserves support a 6 year mine life for the Macraes
project with a production rate that is expected to average
approximately 200,000 ounces gold per annum commencing
in 2008.
Reefton Gold Project The Reefton Project is located
approximately 7 kilometres southeast of the township of
Reefton, within the West Coast region of New Zealand’s
South Island. It consists of four open pits; Globe Progress,
General Gordon, Empress and Souvenir and a 1.0Mtpa
crushing, grinding and flotation plant which creates the
gold concentrate that is sent by rail to the Macraes pressure
oxidation facility for final processing.
The mine is expected to produce approximately 70,000
ounces gold per annum and has at least 6 years remaining
mine life.
Recap
Melbourne
Macraes
Reefton
Didipio
9OGC/AR/07
Engineering staff load liners into the ball mill at the Macraes’ Processing Plant.
Didipio Gold Copper Project The Didipio Gold Copper
Project is located approximately 270 kilometres north
of Manila in the Philippines. The project is held under a
Financial or Technical Assistance Agreement granted by
the Philippines in 1994.
The project is due to commission in 2009 and is expected to
support approximately 4 years of open cut mining (including
pre-production) and 11 years of underground mining, followed
by 2 years of stockpile processing. The proposed 2.5Mtpa
processing plant is expected to average approximately
110,000 ounces of gold and 15,000 tonnes of copper
concentrate per annum for the first 10 years of operation.
Exploration Assets As well as a high quality portfolio of
producing and developing mines, OceanaGold has assets
which demonstrate immense exploration potential.
The Company has dominant control of the prospective Reefton
and Macraes goldfields in New Zealand. The OceanaGold
exploration strategy is to discover additional underground
deposits (like Frasers) at the Macraes operation and to target
new satellite open pits surrounding the Reefton operation.
The Company also has one of the most prospective gold-
copper exploration portfolios in the Philippines, which
historically has been a significant producer of gold, copper,
nickel and chrome.
Exploration activities are ongoing on a number of projects
including Manhulayan and Papaya. Both have gold-copper
porphyry signatures. Additionally, near-mine exploration will
take place concurrently with construction at Didipio to target
already identified near-mine anomalies.
10 YEAR GOLD
1000
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US$ PER OUNCE
HIGH 1002.50 LOW 252.80
MA
R 9
8
MA
R 9
9
MA
R 0
0
MA
R 0
1
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R 0
2
MA
R 0
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6
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BASED ON NEW YORK CLOSE
Reinforce
Operations
10OGC/AR/07
Macraes Gold Project, New Zealand’s largest gold mine has produced over 2 million ounces of gold since operation.
Macraes Operation Overview The Macraes operation
performed in-line with expectations producing 145,312 ounces
which included 29,037 ounces from the Frasers Underground
development. This was 25% lower than 2006 and reflects
processing lower grade stockpiles through the plant in the
first three quarters as we completed the waste stripping
campaign at the Macraes pit. This waste stripping campaign
was completed by the beginning of the fourth quarter resulting
in a dramatic operational improvement with the higher grade
material from the pit being processed through the plant.
Total material moved during 2007 was 50,059,468 tonnes
which was 11.70% lower than 2006, as a result of longer
hauls from the deeper portions of the pit as well as increased
weather delays.
Commitment to continuous improvement
Throughout the 2007 year we remained focused on
continuous improvement, with a number of projects designed
to give real and measurable improvements to the operation
undertaken and completed. These initiatives included:
Reinforce
11OGC/AR/07
Reefton 2007 marked an important point in the Company’s
history with the commissioning of its first new mine located in
the historic mining district of Reefton.
The official opening of the Reefton Open Pit Gold mine was
held on the 3rd July with a focus on the history of the region’s
gold mining and its contribution to New Zealand.
The mill commissioning ramp-up encountered a number
of challenges. These were exacerbated with colloidal clay
contained in the ore. Significant modifications were required in
the crushing, flash flotation and concentrate handling sections.
Through a range of initiatives these debottlenecking issues
were resolved by the end of the third quarter allowing the
fourth quarter of 2007 to achieve greater than design mill
throughput rates.
The mill throughput for 2007 was 601,162 tonnes of ore
grading 2.60 g/t with an overall recovery of 77.1%.
Reefton produced 37,897 gold ounces in concentrate for
the year, lower than planned due to the challenges
discussed above.
During 2007, most of the mining took place in the Globe
and General Gordon pits. We continue to develop an
understanding of the ore body and expect to improve
recovery in 2008.
Installation and commissioning of the Outotec 300m³
mechanical float cells (the largest of this type operating in
the world). Recoveries increased by approximately 3% as
a result.
Oxygen addition to the carbon in leach circuit in place of
compressed air to help maintain good dissolved oxygen
levels for gold dissolution.
Relocation of the cyanide mixing tank to eliminate the
safety hazard of holding cyanide adjacent to copper
sulphate and ensure the mixing equipment will meet the
International Cyanide code requirements.
Upgrade of the power reticulation system now allows the
operation to draw additional power from Palmerston.
The redesign of the Macraes open pit into Stage 4A and
4B allowed us to access more tonnes of higher grade ore
earlier than originally planned.
Macraes Processing Plant Mill throughput for 2007
continued at a record rate with 5,564,873 tonnes of ore being
processed for the year. Ore was sourced from both the Macraes
open pit and our Frasers Underground development project.
To treat concentrate from the Reefton plant we completed the
installation and commissioning of the concentrate handling
and re-pulping facility.
Development
12OGC/AR/07
Frasers Underground During 2007 development
continued in the Frasers Underground mine with trial stope
mining and mine development.
Infrastructure development was completed to establish
the primary ventilation circuit and mine dewatering.
Development was accelerated above 2007 budget plans in
anticipation of increased stope production in 2008.
Stope production from the trial stoping panel was 235,122
tonnes grading 2.7g/t gold. The mine produced 29,037
ounces during 2007 which was processed at the Macraes
facility.
On 17 January 2008 the Company announced successful
commissioning of the Frasers Underground mine.
Didipio Gold Copper Project During 2007 development
at Didipio progressed as planned. This included the
awarding of the engineering, procurement and construction
management contract to Ausenco.
Contracts were also awarded for the detail design,
construction of the accommodation village and site
investigation and detail design of the larger river crossings.
A number of key personnel were also hired in the year with
senior roles filled for the construction, project and process
manager positions.
Work continued on the 21 kilometre site access road
throughout 2007 and the road reached the project site late
in the year. General maintenance and some improvements
including widening in some areas took place through the
rainy season in the fourth quarter in order to maintain
all weather status and access for project construction
requirements.
The open pit mine plan was confirmed and expressions
of interest sought for a mining contract. The tailings dam
detailed design continued and general arrangement layouts
were made for the mining, process plant and dam areas.
Initial site works commenced and will continue in 2008.
The acquisition of land within the area of disturbance
progressed during the year including reaching a major
agreement with illegal small scale miners.
Geotechnical drilling on Plant Hill is in progress with a local
geotechnical contractor engaged to undertake the drilling.
Development activities for 2008 The tender process for
the open-cut mining contract commenced and a preferred
contractor was identified. Negotiations were completed in
early 2008 with Leighton Contractors (Philippines), a division
of Leighton Asia, selected as the preferred contractor.
Leighton Contractors will mobilise to site in early second
quarter to commence pre-stripping and the construction of
the tails storage facility.
In addition, the bulk earthworks on Plant Hill and the ROM
pad will commence late in accordance with planning. The
mills remain on schedule for arrival in late third quarter
2008 with the construction of the process plant to take place
through the second half of 2008 and into 2009.
13OGC/AR/07
Development continued in 2007 at the Frasers Underground.
Resources
Exploration
14OGC/AR/07
New ZealandThere is excellent potential for additional discovery at both
Macraes and Reefton. OceanaGold’s exploration strategy is
primarily focused on the discovery and delivery of resource
ounces by the exploration teams to replace mined ounces in
a timely manner. It also provides increased mining flexibility
and growth. Our exploration teams are based at both
Macraes and Reefton.
In 2007 we spent NZ$4.3 million on exploration at our New
Zealand projects. Of that, 65% was dedicated to Macraes,
34% to Reefton and the remaining 1% to regional exploration.
Our drilling programs for the year totalled 12,550 metres. We
drilled 9,240 metres at Macraes, and 3,310 metres at Reefton.
Macraes
Extensive infill drilling at Frasers Underground has continued
to increase confidence in the resource. The results will be
integrated into an updated resource/ reserve model which is
expected to be completed in the first quarter of 2008.
Wedge hole and navigational drilling techniques were applied
to ensure that the locations of the drill holes were optimised
for resource estimation. Diamond drilling results from the
Golden Point Extension area provided encouragement for a
new underground mineralised panel at Macraes.
OceanaGold’s Technical Services Superintendent, Knowell Madambi.
Resources
15OGC/AR/07
Reefton
During the 2007 construction phase of the operation,
advanced exploration programs targeting near-mine
prospects commenced. The focus of this ongoing exploration
is the discovery of near surface, refractory gold deposits that
are amenable to open-pit mining methods and treatment
through the Reefton process plant.
Exploration in the Reefton Goldfield is made difficult by
steep topography, thick forest cover, poor outcrop, a veneer
of glacial sediments and high rainfall. These features, plus
the environmental sensitivity of the location, managed by the
Department of Conservation, have demanded well planned
exploration campaigns. Our exploration strategy has resulted
in successful execution of multiple campaigns, with a focus on
continual improvement going forward.
Drilling at the Reefton Goldfield has demonstrated strong results
from areas within, and adjacent to the current open pit design.
Positive results combined with strong gold values currently have
opened new opportunities proximal to and within current pit
designs for incremental gains in ounces by pit re-optimisations
based on new drilling data. These high grade mineralised
structures have identified significant upside potential.
Rise and Shine
Joint Venture partners CanAlaska Ventures Limited exercised
their option to take a 70% interest in the Joint Venture and will
manage the exploration on this project going forward.
Sams Creek
The Sams Creek project, located approximately 50 kilometres
north-west of Nelson on the North Coast of New Zealand’s
South Island is considered to be a prospective greenfield
exploration target. During the year we concentrated on a
strategy to maximise the property’s value to OceanaGold.
A geological model has been developed for the deposit and a
tenement wide exploration program to evaluate the potential
of this porphyry system proposed. The most effective method
to implement the program is under consideration.
Strategy for the future
OceanaGold expects to spend NZ$4.4 million in 2008 on
exploration in New Zealand. This includes NZ$2.5 million
on the Macraes line of strike and NZ$1.6 million on Reefton.
Exploration programs have been designed to test priority
targets with the objective of meeting targets as set out in
OceanaGold’s exploration strategy. In mid 2008 we expect
positive gains to be made to resources when additional
drilling data is remodelled from Frasers Underground mine at
Macraes and the Globe Progress open pits in Reefton.
2008 exploration campaigns at Macraes are planned to build
on recent success at underground targets such as the Golden
Point extension in order to discover a new underground
panel. Seven targets have been highlighted east of the
mining area at Macraes utilising key geological criteria
derived from drilling and geophysics interpretations. Initial
campaigns will focus on Round Hill east and Golden Point
extensions. A major program of reverse circulation drilling
is also planned to delineate and extend the open pit target at
the Coronation deposit.
At Reefton, the current exploration strategy is discovery and
evaluation of targets proximal to the Reefton development
in order to identify additional ore resources within a viable
haulage distance from the process plant. Exploration targets
are based on finding analogue deposits with potential for
higher-tonnage, sulphide associated mineralization. The
exploration diamond drilling programs will continue to
test additional mineralised structures such as the Supreme
deposit, proximal to the Reefton mine. Exploration at Reefton
will continue to focus on defining additional open pittable
resources. A longer term goal is to identify targets along the
line of lode that may have been missed by the early explorers
due to a veneer of glacial cover. Potential also exists for the
discovery of low tonnage but high grade mineralization that
may constitute an attractive mining opportunity.
There are also opportunities to complete low-impact
exploration such as geochemical sampling and geophysical
surveys in order to generate or upgrade other exploration
targets. New prospects requiring drill testing are expected to
result from this work in future.
Exploration continued
16OGC/AR/07
Philippines Tenement Map
PhilippinesThe Company believes that the Didipio Intrusive Complex
which is located within a 3 kilometre radius of where the
Didipio mine is currently being built, holds enormous
potential for future discovery(s). Our exploration strategy
is primarily focused on consolidating the work carried out
by Climax Mining (company’s predecessor) prior to the
November 2006 merger. This involves drilling programs
at the Didipio mine and on a number of highly prospective
prospects in Northern Luzon and Mindanao. Exploration
teams are based at both Didipio and Butuan in Mindanao.
In 2007 we spent US$1.193 million on exploration in the
Philippines. Of that, 32% was spent on the Manhulayan
Copper Gold Project, 30% on FTAA exploration including the
Papaya prospect, 7% on capital expenses to set up the
exploration offices in the Philippines and the remaining 31%
on regional exploration including Claveria, Manag, Paco,
Asiga and new projects. In addition, US$679,956 was spent on
the infill drilling program at Didipio.
During 2007 drilling totalled 5,964 metres, carried out as part
of the infill drilling program. Near mine exploration drilling
will begin near the mine in early Feb 2008 and at Manhulayan
at the end of the first quarter 2008.
Didipio Project
The 2008 exploration program at Didipio includes an ongoing
infill drilling program and various near mine exploration
programs. The infill drilling program has confirmed results from
previous drilling and has produced some very good results from
the high grade quartz breccia deposit core.
Near mine exploration within 1.5 kilometres of the mine will
include prospects near the current development footprint
(such as Morning Star, Midnight J and True Blue) and soil
anomalies that appear to be extensions along the structures
that give rise to the Didipio deposit. Previous work including
mapping, soil sampling, Gradient Array and Dipole-dipole
Induced Polarisation/Resistivity, Ground Magnetics and
Aerial Magnetics and Radiometrics Surveys provide
immediate drill targets for these prospects.
True Blue has been drilled and is proven to be a smaller
version of Didipio with a similar series of increasingly
fractionated intrusive events and attendant copper and gold
mineralisation. Results of the drilling to date are currently being
interpreted to determine whether further work is justified.
Within a 3 kilometre radius of the mine, exploration targets
include D’Fox and Runamok, and within the FTAA, other
targets include Papaya. These prospects are seen as priorities
within the 30 or so known prospects known within the FTAA.
The D’Fox prospect comprises a gold-rich copper porphyry
and associated collapse breccia pipe, located 1.5 kilometres
to the southeast of the Didipio Gold Project at a structural
intersection. Significant results from previous drilling include
36 metres of 1.1g/t gold and 0.4% copper and 84 metres of
1.0g/t gold and 0.4% copper. Further drilling is planned.
Runamok is a grass roots exploration prospect with a regional
stream sediment anomaly and close association with faults
seen to have been important in the genesis of the Didipio
deposit. A program of mapping, soil sampling and Dipole-
dipole Induced Polarisation, Resistivity and Ground Magnetics
surveys are planned to determine drill targets in this area.
17OGC/AR/07
At Manag, past explorers identified significant gold-copper
mineralisation and previous drill results include: 69 metres
at 1.3g/t gold and 1.1% copper; 68 metres at 1.2g/t gold
and 0.6% copper; and 125 metres at 0.7g/t gold and 0.6%
copper. Previous field work indicates that the copper anomaly
extends to the north of previously known mineralisation.
Work is continuing to progress the granting of the 2
exploration permits (EPA’s) over this prospect.
At Claveria aeromagnetic surveys have indicated a magnetic
anomaly several kilometres long that corresponds with
significant high grade copper-gold float associated with a
magnetite skarn (up to 9% copper and 31g/t gold). Work is
continuing to progress the renewal of one EP and the granting
of 2 other EPA’s over this prospect.
Strategy for the future
OceanaGold expects to spend US$5.9 million on exploration
in the Philippines in 2008. The Didipio near mine exploration
has the greatest potential to immediately deliver ounces
and will receive US$1.9 million. The Manhulayan project is
allocated US$950,000 to develop and drill exploration targets.
Planned expenditure for Manag, Claveria and Paco projects is
US$723,000, US$628,000 and US$555,000 respectively.
Near mine exploration programs have been designed to drill test
priority targets near the Didipio mine. Additionally, some areas
within 3 kilometres of the mine require detailed soil geochemistry
and geophysical programs to determine drill targets.
Paco and Papaya are ready for drilling however Manag,
Claveria and Manhulayan require detailed soil geochemistry
and geophysical programs to advance them to drilling,
building on the results of extensive grass roots to advanced
exploration effort by Climax Mining. Field work has begun at
Manhulayan and drilling is expected to begin in the second
quarter of 2008.
Australia
Junctions Reef Junctions Reef is a joint venture with Newcrest
Mining Limited (53.20%) and Barrick Australia Limited
(26.82%), and is adjacent to Newcrest’s Cadia operations
in Australia.
Papaya is interpreted as a porphyry gold-copper mineralized
alkalic intrusive complex located 12 kilometres to the west of
Didipio within an alteration zone several kilometres across.
Anomalous gold and copper in soils is common with higher
grades evident from a 5 metre channel sample at Ubon
Creek that returned grades of 3.7g/t gold, 0.1% copper
and 0.1% molybdenum. During 2007 gridding (21.4 line
km), soil sampling (525 samples), mapping and an Induced
Polarization geophysics study (IP Survey) have been carried
out. From this work 4 drill targets have been developed
based on a mixture of copper and gold soil anomalies,
resistivity, IP and magnetics anomalies.
Other priority prospects within the Philippines include
Manhulayan and Paco in Northeastern Mindanao and
Manag and Claveria in Northern Luzon. Initial work
involving mapping and soil/IP grid extensions has begun at
Manhulayan together with further modelling of previous work
at Paco that will result in drilling programs in 2008.
The Manhulayan prospect comprises a copper-gold porphyry
with adjacent low sulphidation epithermal gold veining and
peripheral gold-basemetal sulphide veining. OceanaGold
has an option to a purchase agreement with the tenement
holder. Four diamond holes have been drilled to date with
better intercepts within potassic altered porphyry of 185.00 m
@ 0.33% Cu + 0.16 ppm Au (Hole MDDH-1), and 300.00 m @
0.32% Cu + 0.15 ppm Au, (MDDH-2). Most drilling to date is
interpreted to be peripheral to the main mineralising phase
and several drill targets remain untested with potential to
deliver higher grade intercepts.
The Paco prospect lies immediately adjacent to the Anglo-
American/Philex buried porphyry copper-gold discoveries
of Boyongan and Bayugo (219 million tonnes grading 0.51%
copper and 0.74g/t gold). Interpretation of geophysical data
over the Paco tenement has highlighted a number of targets
in similar structural settings with potential to host porphyry-
epithermal mineralisation. Reconnaissance drilling has so
far failed to penetrate the overlying Quaternary cover to test
targets. Further work is required to identify basement paleo-
highs in favourable geologic settings.
Resources and Reserves
18OGC/AR/07
Mineral Resources
Resource Area
Measured Indicated Measured & Indicated InferredMt Au g/t Cu % Mt Au g/t Cu % Mt Au g/t Au Moz Cu % Cu Mt Mt Au g/t Au Moz Cu % Cu Mt
Macraes 22.20 1.24 - 46.81 1.28 - 69.01 1.26 2.81 - - 28.57 1.28 1.18 - -Reefton 2.92 2.30 - 9.91 2.14 - 12.83 2.17 0.90 - - 3.57 4.29 0.49 - -Sams Creek - - - - - - - - - - - 13.50 1.78 0.77 - -Didipio 34.70 1.40 0.49 29.30 0.65 0.40 64.00 1.06 2.17 0.45 0.29 21.10 0.43 0.29 0.29 0.06Total 59.82 1.39 - 86.02 1.16 - 145.85 1.25 5.88 - 0.29 66.74 1.27 2.73 - 0.06
(Resources inclusive of Reserves)
Mineral Reserves
Reserve Cut Off Grade
Reserve Area
Proved Probable Total ReserveMt Au g/t Cu % Mt Au g/t Cu % Mt Au g/t Au Moz Cu % Cu Mt
0.5 g/t Macraes 17.32 1.24 - 15.42 1.39 - 32.74 1.31 1.38 - -0.8 g/t Reefton 1.68 2.38 - 5.03 2.48 - 6.72 2.46 0.53 - -0.56 g/t Didipio1 20.18 1.54 0.60 12.79 1.38 0.54 32.98 1.48 1.57 0.58 0.191
Total 39.19 1.45 - 33.24 1.55 - 72.43 1.49 3.48 - 0.1911 Cut-off is gold equivalent based on US$500/oz gold and US$1.90/lb copper; 0.56g/t Au Eq for open pit, 1.0g/t AuEq for underground. A 0.7 g/t gold cut-off was used in the oxide zone.
As at 31 December 2007, OceanaGold had total Measured
and Indicated Mineral Resources of 5.88Moz of gold and
0.29Mt of copper and Inferred Mineral Resources of 2.73Moz
of gold and 0.06Mt of copper. This includes Mineral Reserves
of 3.48Moz of gold and 0.19Mt of copper.
The tables above summarise OceanaGold’s Mineral Resource
and Mineral Reserve inventories as at 31 December 2007.
They supersede all previous statements of OceanaGold’s
Mineral Resource and Mineral Reserve inventories. The
Mineral Resources stated include the Mineral Reserves.
Technical DisclosureThe estimates of Mineral Reserves and Mineral Resources in this report were prepared in accordance with the standards set out in the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves – The JORC Code” (December 2004) as published by the Joint Ore Reserve Committee of the Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC) and in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) under the guidelines set out by the Canadian Institute of Mining, Metallurgy and Petroleum. The JORC Code is the accepted reporting standard for the Australian Stock Exchange and New Zealand Stock Exchange.
Unless otherwise stated, the scientific and technical information in this Annual Report in respect of the mineral projects of the company is based upon the following NI 43-101 compliant technical reports (collectively, the “Technical Reports”) which have been filed and are available at www.sedar.com under the company’s name:
(a) “Independent Technical Report for the Macraes Project located in the Province of Otago, New Zealand” dated May 9, 2007, prepared by J. S. McIntyre, I. R. White and R. S. Frew of Behre Dolbear Australia Pty Limited, N. A. Schofield of Hellman and Schofield Pty Ltd., B. L. Gossage of RSG Global Pty Limited and R. R. Penter of GHD Limited;
(b) “Independent Technical Report for the Reefton Project located in the Province of Westland, New Zealand” dated May 9, 2007, prepared by J. S. McIntyre, I. R. White and R. S. Frew of Behre Dolbear Australia Pty Limited, B. L. Gossage of RSG Global Pty Limited and R. R. Penter of GHD Limited; and
(c) “Independent Technical Report for the Didipio Gold-Copper Project located in Luzon, Philippines” dated May 9, 2007, prepared by A van der Heyden of Hellman and Schofield Proprietary Limited, J. Wyche of Australian Mine Design and Development Proprietary Limited and J. McIntyre of Behre Dolbear Australia Pty Limited.
Each of the authors of the Technical Reports is a “qualified person” for purposes of NI 43-101 and is independent of the Company within the meaning of NI 43-101.
Where Mineral Reserves and Mineral Resources of the company’s mineral properties have been shown to be depleted by annual production as at December 31, 2007, such information is based on information compiled by Jonathan Moore (Exploration and New Zealand Resources), Knowell Madambi (Macraes Open Pit Reserves), Terry Moynihan (Macraes Underground Reserves), Paul Miles (Reefton Reserves), John Wyche (Philippines Reserves) and Arnold van der Heyden (Philippines Resources). Jonathan Moore, Paul Miles, Terry Moynihan and Knowell Madambi are Members of the Australian Institute of Mining and Metallurgy and are full-time employees of OceanaGold. John Wyche is a member of the Australian Institute of Mining and Metallurgy and is a full-time employee of Australian Mine Design and Development Pty Ltd. Arnold van der Heyden is a member of the Australian Institute of Mining and Metallurgy and is a full-time employee of Hellman & Schofield. All such persons are “qualified persons” for purposes of NI 43-101 and have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Messrs Moore, Madambi, Miles, Wyche and van der Heydon consent to inclusion in the report of the matters based on their information in the form and context in which it appears.
19OGC/AR/07
Measured Indicated Inferred2006 2007 2006 2007 2006 2007Moz Moz Moz Moz Moz Moz
MACRAES 0.90 0.89 1.98 1.92 1.39 1.18REEFTON 0.15 0.22 0.81 0.68 0.61 0.49SAMS CREEK . . . . 0.77 0.77DIDIPIO 1.56 1.56 0.61 0.61 0.29 0.29TOTAL 2.61 2.66 3.41 3.21 3.06 2.73
Mineral Resources
The copper inventory remains unchanged.
Proved Probable Total2006 2007 2006 2007 2006 2007Moz Moz Moz Moz Moz Moz
MACRAES 0.73 0.69 0.76 0.69 1.49 1.38REEFTON 0.13 0.13 0.40 0.40 0.53 0.53DIDIPIO 1.00 1.00 0.57 0.57 1.57 1.57TOTAL 1.86 1.82 1.72 1.66 3.59 3.48
Mineral Reserves
The copper inventory remains unchanged.
Comparison of 2006 and 2007 inventories
Mineral Resources OceanaGold’s Measured and Indicated
Mineral Resource inventory showed a net decrease of
0.14Moz of gold between 31 December 2006 and 31
December 2007 due to:
Decreases resulting from:
mining at Frasers Underground, Frasers open pit and
Golden Ridge open pit at Macraes and mining at Globe
Progress / General Gordon open pits at Reefton;
infill drilling of the Panel 1 at Frasers Underground
resource, Macraes; and
drilling and remodelling of the Empress resource at Reefton.
Increases resulting from:
infill drilling in Panel 2 extension at Frasers
Underground, Macraes.
OceanaGold’s Inferred Mineral Resource inventory showed
a net decrease of 0.32Moz primarily as a result of conversion
of Panel 2 Frasers Underground Inferred mineralisation to
Indicated via infill drilling, infill drilling of Panel 1 Frasers
Underground and revision of deeper mineralisation in Globe.
Exploration success for deep extensions of Golden Point
mineralisation resulted in an increase in Inferred resources.
The following resources remain unchanged;
At Macraes, resource estimates for Coronation, Deepdell,
Frasers Undeground Panel 2 Deeps, Golden Bar and Taylors.
At Reefton, resource estimates for Souvenir, Supreme and
Blackwater. Resources for both Sams Creek and Didipio.
Mineral Reserves OceanaGold’s Mineral Reserve inventory
showed a net decrease of 0.11Moz of between 31 December
2006 and 31 December 2007 due to:
Decreases resulting from:
mining at Frasers Underground, Frasers open pit and
Golden Ridge open pit at Macraes and mining at Globe
Progress / General Gordon open pits at Reefton;
infill drilling of the Panel 1 at Frasers Underground
resource, Macraes; and
Increases resulting from:
infill drilling in Panel 2 extension at Frasers
Underground, Macraes
reoptimisation of Globe / General Gordon at Reefton
drilling, remodelling and reoptimisation of Empress
at Reefton.
Looking forward During 2008, OceanaGold aims to
increase its resource base net of mining depletion through
concurrent exploration campaigns at Macraes, Reefton and
the Philippines.
The 2008 exploration program at Macraes will include both
open pit and underground targets. Seven underground
targets have been highlighted down-dip of the existing open
pits at Macraes. These targets meet key geological criteria
identified from the interpretation of drilling and geophysical
data. Initial campaigns will focus on Round Hill and Golden
Point extensions, the latter building on exploration success
during 2007. A major program of reverse circulation drilling
is also planned to delineate and extend the open pit target at
the Coronation deposit.
The focus at Reefton for 2008 will be to both delineate new,
and extend known, open pit resources within close proximity
to the Globe plant site. Exploration efficacy within the Reefton
field is expected to increase during 2008 as mining at Globe,
General Gordon and Empress augments our geological
knowledge base. A longer term goal is to identify targets
along the line of lode that may be geochemically obscured by
post-mineralisation glacial cover.
For the Philippines, aside from ongoing regional exploration,
the focus will be on the Didipio deposit itself and prospects in
close proximity. At Didipio, the 2008 exploration programme
includes continuing the 2007 infill resource definition drilling
program as well as a number of near mine exploration
programs. The infill drilling program will increase the
confidence of the resource estimate and has particularly
sought to increase definition of the high grade gold core of
the deposit.
Immediate near mine exploration, within 1.5 kilometres of the
mine, will include prospects such as Morning Star, Midnight J
and True Blue, and soil anomalies structurally related to
the Didipio deposit. Previous work including geological
mapping, soil geochemistry and geophysics will be used to
target drilling. Further out, yet within a 3 kilometre radius of
the mine, exploration targets including D’Fox and Runamok
will be assessed for drilling.
Introduction
Welcome to the sustainability report section of OceanaGold’s
2007 annual report.
This section contains details of our sustainability policies and
activities across our operations in New Zealand and our recently
acquired assets in the Philippines. It highlights both our
achievements and opportunities for us to improve.
Sustainability is at the heart of our business and to us it means
conducting a viable business that delivers financial, social and
environmental benefits that continue to deliver during our
operations and well into the future. It is much more than simply
environmental sustainability, and while our environmental
policy has helped us on the path, we are developing an all-
encompassing sustainability policy this year.
Our challenges include the nature of gold as a finite resource,
safely managing our existing operations, the communities we
affect, the people we employ, dealing with inherited issues
within our new acquisitions and complying with and exceeding
government requirements.
We are genuine about developing sustainability within
our business, as we know that our activities can impact the
landscape and communities around us. Sustainability is a
journey and we acknowledge that we are at the beginning
of this journey. We aim to continue to meet government
requirements and to become a market leader in sustainability.
In 2007 we engaged the services of Australia’s leading
sustainability consultants to help us review our sustainability
policy, our reporting, and our communications on this aspect
of our business.
We welcome you to join us on this journey towards
sustainability, and we look forward to communicating our
achievements in our ‘Towards Sustainability’ report in the
years to come.
Steve Orr
Chief Executive Officer
Ready
Sustainability
20OGC/AR/07
Summary
OceanaGold’s sustainability initiatives to date have delivered
some great successes for local communities, health and safety
levels and the environment, with activities so far being based
on the company environmental policy, health and safety
requirements and local community input.
As the company moves towards greater sustainability it has
adopted a range of strategies to make a positive difference.
Our sustainability policy will soon be finalised, and will
deliver a fully-developed framework for the company to
follow in delivering coordinated, thorough and measurable
sustainability achievements.
In New Zealand the Negotiated Greenhouse Agreement
minimises our greenhouse emission, strong relationships
with the local communities have helped foster successful
social partnerships, pest control and biological diversity have
improved the local environment while our health and safety
efforts have successfully lowered Lost Time Injuries.
In the Philippines, the challenges inherited with our
acquisition of the Didipio project give us many opportunities
to connect with the community, improve the environment
and deliver a safe and sustainable operation. We are already
delivering a range of educational scholarships and health
and nutrition programs to local communities as well as
rehabilitating much of the inherited lands through
re-forestation initiatives.
Visitors to OceanaGold’s operations get to see first hand how a mine office works.
21OGC/AR/07
“Ensuring our company remains
viable, providing benefits that will
outweigh and outlast our impact
on the communities in which we
operate, through the consideration
of social, environmental, ethical
and economic aspects in
everything we do.”
Steve Orr
Highlights of our 2007 Sustainability Activities
22OGC/AR/07
EnvironmentEnvironmental awareness is a core value within our organisation.
We aim to minimise and manage both our on-site and off-site environmental impacts.
We are mindful of our obligations to protect the environmental and heritage values of the areas in which we operate.
Mine closure plans take into account landscape and land uses to ensure that the site will not pose environmental risk for future generations.
We conduct extensive environmental monitoring programs at each of our sites.
We develop and operate biodiversity and aquatic biodiversity programs.
We manage a successful habitat and species protection program at Reefton over a 1,000 hectare area.
There is now an increased emphasis on environmental awareness in employee training.
We continued to progressively rehabilitate our sites:
Rehabilitating 12 hectares at Macraes
Planting out 6.3 hectares as well as 5 hectares of hydro seeding at Reefton
Cultivating 97,000 seedlings of assorted species for rehabilitation programs at Didipio.
An additional cyanide destruction plant was commissioned at Macraes.
We manage waste recycling/reuse programmes at all operational sites.
We signed a Negotiated Greenhouse Agreement in NZ in 2006 and continue to comply with this agreement.
CommunityWe are committed to helping communities achieve long term economic and social development.
We have contributed to 35 different community projects and charities throughout the Otago, Waitaki and the West Coast in New Zealand.
The company signed an agreement to become a major sponsor of Inangahua Vision 2010 which will cover 16 community projects in
the Reefton district over a five year period.
We continued to develop our Maori relationships, with representatives from Ngah Wae Wae attending the company’s Reefton Gold
Project official opening ceremony.
In the Philippines we have established a series of educational support programs and scholarships for the local community.
We have assisted in implementing nutrition programs focusing on health in the communities near Didipio.
We are working to establish a community-managed commercial forest for on-going community income in the Philippines.
Health and SafetyWe aim for a continuing decrease in the Lost Time Injury Frequency Rate (LTIFR) for our sites.
50% LTI reduction at Macraes.
Nil LTI at Frasers underground mine and Didipio.
We have a first aid training program implemented for the entire work force.
We have advanced first aid training programs established for Mine Rescue Teams.
We are developing employee health monitoring programs including drug and alcohol awareness.
Our roadmap to sustainability - real steps towards real results
The first step of our journey towards sustainability was to formulate a “Towards Sustainability” roadmap. This roadmap is currently
helping to guide the development of our sustainability policy and ensure that the underlying policies and activities are robust,
measurable, and relevant for all of our stakeholders. These stakeholders include shareholders to employees to the communities in
which we operate. This roadmap outlines the steps to achieve sustainable outcomes.
23OGC/AR/07
Material issues assessment, stakeholder mapping, policy review, data capture review
Reporting of sustainability performance via 2007 annual report
Develop key disclosures and indicators, track data using procedures for inclusion in next years report
Development of stakeholder engagement strategy
Compile our first ‘Towards Sustainability Report’
Undertake internal assurance of report content
Consultation with external stakeholders to provide input and encourage improvement of our report
External 3rd party assurance of sustainability report using AA1000 standard
Children on their way to school in the Didipio Valley, Philippines. Many children in the Philippines walk to school and this can take up to one to four hours in one direction. In 2007 OceanaGold continued improving the local infrastructure through the construction of roads and bridges in the Didipio Valley. This assists the company in its development phase and also provides the community with safer options for moving around.
ACTION MEASUREMENT ACCOUNTABILITY
Regenerate
Environment – the world we live in
24OGC/AR/07
OceanaGold is committed to becoming a resource industry
leader in our approach to environmental issues.
To ensure that we maintain industry best practice and
promote continuous improvement in environmental
management, we reviewed and updated our corporate
environmental policy during 2007. The policy directs our
employees and contractors on how to work with minimal
impact on the environment and fosters a sense of stewardship
for the lands we work on. The policy aims to place us at
the forefront of environmental impact identification and
mitigation within the mining industry.
In addition to training all of our staff in this area, we have
a team of highly dedicated environmental staff spread
across our operations who are committed to constantly
seeking improvements in the environmental performance
of our company.
Our aim at all stages of mining, from exploration and
development to operation and closure is to minimise
and manage both our on-site and off-site environmental
impacts. We are mindful of our obligations to protect the
environmental and heritage values of the areas in which
we operate. Our closure plans as they develop, will take
into account landscape values and land uses to ensure that
sites do not pose any unacceptable environmental risks for
future generations.
Regenerate25
OGC/AR/07
OceanaGold Corporation Environmental Policy
OceanaGold is committed to responsible environmental
management to fully comply with all applicable statutory
requirements. The company aims to be an industry leader in
the identification, assessment, mitigation and monitoring of its
environmental impacts.
Specifically, OceanaGold commits to:
Identify and mitigate all environmental and human health
impacts associated with its activities. In undertaking
mitigation measures the company will aim for a net
environmental gain.
Comply with all applicable laws and standards; and apply
company wide standards based on international best
practise that minimise adverse environmental impacts
arising from its operations.
Rehabilitate the mine sites to a stable landscape and
land use which do not pose any unacceptable risk to
the environment.
Develop an end of mine life land use, in consultation with
stakeholders, that will leave a positive legacy.
The aim of this policy is to provide direction to our employees
and contractors undertaking activities on the Company’s
behalf. The policy aims to place OceanaGold at the forefront
of environmental impact identification and mitigation within
the mining industry.
We are conscious that our activities can have a lasting impact
on the environment, and where possible we will aim for a net
environmental gain from our activities. We will comply with all
applicable laws and standards in the countries we work in. We
will develop a company wide set of environmental standards.
These standards will be based on international best practice,
taking into account the environmental impact of our activities
and we will aim to minimise any adverse environmental
impacts.
Our closure plans will take into account landscape and
land uses so that the site does not pose an unacceptable
environmental risk. We also aim to leave a positive legacy
at the end of mine life. This legacy may be in relation to
employment opportunities, improved health or social
outcomes, or a positive environmental benefit.
Environment – areas of measurement and activity
1. Compliance and Environmental Monitoring
2. Surface water and groundwater
3. Stream sediments
4. Biodiversity and aquatic biodiversity
5. Noise
6. Dust
1. Compliance and environmental monitoring
OceanaGold is committed to complying with all
environmental regulatory requirements under which we
operate. We aim for industry best practice and if we can we
will exceed, not just meet any regulatory requirements.
In New Zealand we operate under a significant number
of resource consents, access arrangements and permits.
Within the Philippines our operations are controlled by the
environmental compliance certificates and permits issued
at national, regional and the local level.
To ensure compliance we have extensive environmental
monitoring programs at each of our sites. These programs
include, but are not limited to, monitoring of:
Potential seepage from tailings dams and waste rock
stacks to detect any seepage that might impact on surface
or groundwater.
Groundwater - in order to understand the existing
condition of groundwater and look for impacts associated
with our activity.
Surface water - both discharges and background
concentrations, allowing us to assess the impact of our
activities on receiving waters.
Stream sediments - to assess any changes due to our
activities.
Site biodiversity - to track changes in ecosystem health.
Aquatic biological diversity - to track changes in the
health of waterways.
Noise - to determine any loss of amenity to the
surrounding community.
Dust - to assess impacts to air quality.
Waste rock stacks in the process of being rehabilitated at Macraes. At all its mine sites OceanaGold ensures rehabilitation begins progressively, once areas are available for rehabilitation and throughout mine life.
Sustainability continued 4. Biodiversity and aquatic biodiversity In New
Zealand, we are assessing the impact of our activities and
programs against established baseline data and background
sites. Monitoring indicates that our pest control program at
Reefton is benefiting the environment and that our in-stream
impacts are generally minimal.
In the Philippines, where operations are yet to commence,
baselines studies will be undertaken in order to benchmark
the impact of our operations on the biodiversity of the region.
Specific achievements in 2007 included:
Positive trends in bellbird numbers – as a result of our
pest control program at Reefton.
Approval for two additional artwork contributions for the
Company’s heritage and art park near Macraes.
27 hectares (35,000 seedlings) of planting of assorted
species in the Didipio valley and surrounding areas.
5. Noise Our aim is to minimise the impact of noise from
our operations on the community. We have established noise
bunds in appropriate areas and have implemented a system
to minimise noisy activities outside of regular daytime hours.
As a result, in 2007 we received zero noise complaints related
to our operations at Macraes and Reefton.
6. Dust Dust monitoring programs are in place within our
operating sites to minimise the nuisance dust created by our
activities.
At our Macraes operation, previous years monitoring has
shown dust from the mixed tailings impoundment during
the August to October period was an increasing nuisance.
To manage this, we installed a water-based dust suppression
system to minimise the generation of dust from site. This has
resulted in a measurable improvement in 2007.
The table below outlines the type and frequency of sampling
undertaken at each of our sites.
2. Surface water and groundwater The results of our
monitoring programs at Macraes and Reefton during 2007
show that our existing mine activities are not adversely
impacting the local environment.
Surface water monitoring was continued at Didipio during
2007, providing information on existing conditions inherited
with the acquisition of this site. We also continued to develop
the wells and springs inventory to establish existing
conditions and natural variability, prior to the start of mining
in line with our 2007 target commitments.
3. Stream sediments Our stream sediment programs
monitor rates of sediment transport to compare the impact at
established sites with impact at sites where we may operate
in the future.
While the results to date indicate that our activity has not
had any significant measurable impact at any of our sites,
the monitoring completed at Didipio indicated traces of
mercury in the sediments, which may be a result of the
small scale mining (not related to our operations) that has
been prevalent in the area for a number of years. Upon
commencement of operations it is expected that no further
mercury contamination will occur as OceanaGold will not use
mercury on site.
Seepage – tailings and waste rock
Groundwater Surface waterDischarges to water
Tailings as discharged
Biological/Biodiversity
Noise Dust
New ZealandMacraes Monthly Monthly Quarterly N/A Weekly Quarterly Monthly MonthlyReefton Monthly Quarterly Daily Daily Weekly Quarterly Quarterly MonthlyPhilippinesDidipio* N/A Annual Monthly N/A N/A Annual - -
Note: Didipio is in development stage and consequently the level of monitoring reflects that stage Once the site is fully operational, the frequency and type of monitoring will move into line with sampling and measurements conducted at our New Zealand operations.
Table 1: Site monitoring programs and frequency
26OGC/AR/07
Delia Tyson, OceanaGold’s Environmental Officer changes a filter in the Total Suspended Particulate (TSP) monitor – one of three located at Macraes. The monitors determine the amount of suspended material (dust) in the air. With this information the company can adjust its activities, particularly during dust prone months to ensure the level of dust is kept within consent standards.
Opportunities for Improvement
Statutory Compliance We aim to meet or exceed our
environmental statutory requirements and where we are in
breach of compliance we will:
report the non-compliance;
identify the cause of the non-compliance;
work at eliminating the cause;
rehabilitate or repair any damage as a result of the non
compliance.
In 2007 the following areas for improvement were identified:
At Macraes we continued to monitor residual impacts
from historical mining activities (since it became a
goldfield pre OceanaGold), associated with reduced
pH and elevated iron and arsenic levels in surface and
groundwaters around the site. Monitoring showed
that conditions had not been further degraded by our
activities, and discussions are currently underway with
the regulators on how to manage this historical issue.
At Reefton, an unplanned tailings discharge occurred,
which resulted in the Company being issued with an
infringement notice from the authorities. This incident
was investigated and a number of process changes
were implemented to ensure that this type of unplanned
discharge doesn’t re-occur.
At Reefton, elevated sediment load at one surface water
location (as a result of mining activities) led to the
Company being issued with four infringement notices
from the authorities. To help manage this issue into the
future, a sediment source control program consisting
of hydro seeding and effective planting systems was
implemented. This program delivers seeds and moist
mulch at the same time for surface stabilisation and better
management of surface drainage. Additionally, improved
management of the mining fleet during periods of high
rainfall has been implemented.
Goals and Targets for 2008
Macraes
At Macraes, maintain the number of Moderate, Significant
and Major Impact (levels 3 to 5) environmental incidents
at 0.
Complete rehabilitation work on 50 hectares in 2008 and
apply maintenance fertiliser to 40 hectares of the site.
Produce 10,000 trout for release from the Macraes Trout
Hatchery.
Maintain the Macraes Township and the Heritage and Art
Park features to a high standard to encourage tourism in
the local community.
Accurately report environmental incidents in a timely
fashion.
Complete a comprehensive energy audit of the Macraes
operation.
Reefton
Complete 3 hectares of rehabilitation inline with the area
available for rehabilitation.
Didipio
Stabilise and/or rehabilitate disturbed areas as soon as
areas become available.
Maintain the site tree nursery.
Maintain tree planting program.
Expand and enhance the environmental monitoring
program inline with increased activity and development
on site.
27OGC/AR/07
Community – the people we work with, the people we affect
28OGC/AR/07
New Zealand
Macraes In 2007 at our longest-standing operation, over
35 different community projects and charities throughout
the Otago region and Waitaki districts received either
sponsorship or funding from the company.
Beyond monetary funding, OceanaGold staff also participated
in non-monetary initiatives such as hosting overseas
visitors at the operation, school careers days and provided
presentations to various community groups on various
aspects of mining including geology and the environment.
Highlights from 2007 included:
Otago Youth Wellness Trust - OceanaGold provided
funding towards “Stars” a youth development program
which assists year 9 students in making their transition to
a secondary school environment. Teachers and senior
students are trained to be peer mentors for the year
9 students. Through peer mentoring, senior students
develop leadership skills, creating a strong sense of
community within the school.
Otago Life Education Trust - OceanaGold provided
funding towards the Trust’s mobile classrooms which
travel to schools throughout New Zealand. The
classrooms are air-conditioned and equipped with sight,
sound and aroma technologies and three-dimensional
film technology, making learning a fascinating
experience.
Macraes Trout Hatchery ‘Bring the Kids Fishing Day’ –
An annual community fishing day which is hosted by
OceanaGold and held at the Lone Pine Reservoir, a part
of the Macraes Fish Hatchery. It provides the community
and our staff with the opportunity to bring their families to
our site and experience some of the unique facilities such
as the fish hatchery.
‘New Zealand Gold Panning Championships’- Managed
by the Otago Goldfields Heritage Trust, OceanaGold was
the primary sponsor of the event which celebrated the
history of the area through gold panning displays and
competitions.
OceanaGold is committed to assisting the communities in
which we operate to achieve long-term economic and social
development. We know that our activities can have both
positive and negative affects on the communities surrounding
our sites, including increased employment opportunities,
land re-assignment and funding opportunities.
We look for ways to develop local cultures and communities,
including investing in youth who represent the future of these
communities. We especially seek to ensure they will have
sustainable opportunities beyond the eventual closure of our
mines, so that once we have closed any mine, their levels
of health and education are self-perpetuating and that the
all-essential community-spirit is alive and well. We carefully
consider social, cultural, environmental, governmental and
economic factors when considering new ways to benefit
the community.
We are committed to involving residents, governments
and government agencies, non-government organisations,
international agencies and other interested parties in
creating tangible long-term development solutions for
these communities.
John Bywater, Consenting and Environment Projects Manager and John Ellison, representative of Kati Huirapa Runanga Ki Puteteraki greeting one another before signing a memorandum of understanding between OceanaGold and Runanga, a Maori representative body (South Island tribe) in December 2004.
Respect
29OGC/AR/07
Beech was made available to the local Rotary group,
which cut, split and delivered trailer loads of firewood to
a number of needy people in the Reefton community. Two
employees are part of that group.
Beech poles were supplied to the local Pony Club
Beech went to Buller Sports Association for a Buller
district woodchopping event.
Cedar was made available to the Miners Hut in Broadway
for re-roofing the shingle roof.
OceanaGold employees from the Social Club volunteered
to be involved with the Buller Beach Cleanup Day, not by
travelling to Westport, but by cleaning up a section of the
“beach” along the Strand beside the Inangahua River in
Reefton.
In November 2007, a commercial mine tour operation run
by a local business started, supported by OceanaGold on
a nil cost basis. Since operations began, 153 visitors have
joined these tours, with visitor numbers increasing and
larger groups being catered for. This is seen as a long-term
sustainable business that will out-last mining operations
in Reefton.
Reefton In 2007, OceanaGold contributed to a range of
community initiatives.
These included sponsorship, donations and in kind time
donations towards:
Reefton Rugby Club.
Inangahua Tourism Promotions, which supports local
community initiatives.
“Who Cares” community care organisation.
Sacred Heart School – resource books for mathematics
program 2007.
Reefton Junior Soccer club – equipment, and an
OceanaGold employee became a volunteer coach.
Reefton Working Mens Club Golf Section Tournament –
funds raised were directed to the Reefton Youth Centre.
Reefton St John Ambulance.
In late 2007 OceanaGold signed an agreement to become
a major sponsor of Inangahua Vision 2010. The Inangahua
Vision 2010 project covers 16 community projects in the
district and the local fundraising committee’s target is to
secure NZ$300,000 in funding over the next five years to
complete these projects. The company is now represented on
the fundraising committee and has committed NZ$25,000 to
the initiative which will be spread over 5 years.
We also worked closely with the Department of Conservation
to provide timber cleared from the mine site to local
communities for their own use:
Rimu logs were delivered to Ngati Waewae, the Iwi group
who hold customary rights in the district. The timber will
be used to build a marae, a traditional Maori meeting
house, near Hokitika.
Beech poles were supplied for a major Department of
Conservation coal mine tunnel restoration project at
Denniston, near Westport.
Sustainability continued
30OGC/AR/07
Livelihood Livelihood programs ensure that surrounding
communities are able to continue to develop and prosper
once any financial assistance from the mine has ceased
following mine closure. The programs are directed at
improving existing subsistence farming practices in the
Didipio region and introducing new sustainable options
that are acceptable to the communities. This development
process is accompanied by a community ‘capacity building
program’ for managing enterprises and co-operatives, and
familiarising community members with new techniques
and skills. Livelihood activities in 2007 included welding,
dressmaking and catering programs.
Economic Development During the life of the Didipio
mine we will continue to create community partnerships to
develop and maintain long-term activities that drive economic
development within the communities affected by the mine.
Planning for these programs will begin in 2008 with the
development of an agro-forestry and a community-managed
commercial plantation forestry. There is potential for
the planting of 4,000 hectares of commercial forest and
if achieved, is an example of a project that will provide
sustainable income for the communities in the Didipio valley
after mine closure. Initial activities relating to this forestry
plantation scheme have focused on establishing nurseries and
replanting a buffer zone around the primary mine impact area.
Audits and Reviews Ongoing consultation, dialogue,
audits and reviews with stakeholders impacted by
OceanaGold’s mining activities are essential to the long-
term success of our operations. Regular dialogue leads to
community driven development programs tailored to both
company and community needs.
We have established an independent review and monitoring
team which reports to the OceanaGold Board and to external
stakeholders related to the development and delivery of the
social program. In 2007 our current activities were analysed
by this independent review team and performance gaps were
identified. In the year to come we aim to address these gaps
as part of our journey towards sustainability.
Philippines
OceanaGold acquired its Philippines assets in November
2006 and since that time has been establishing relationships
with Filipino communities near the Didipio project where the
company’s first mine is being developed.
Community development in this area is somewhat different
from our experience in New Zealand and we are working
with local stakeholders to develop programs across three
primary areas - social infrastructure, livelihood and economic
development. With new operational locales comes a range of
new challenges, including language, cultural and educational
challenges. We are working with various stakeholders to
help communicate our strategies and programs to the widest
possible audience.
Social infrastructure
Physical Infrastructure During the community consultation
process, physical infrastructure was identified as a high
priority issue, as it tends to be under-funded in upland
Filipino communities.
We have responded to the need for physical infrastructure
by constructing access roads and foot and road bridges in
several communities along with markets, clean water supplies
and health and school facilities.
Health, Education and Training In response to priorities
that were outlined by the local communities, the Company
established a series of educational support programs
including education scholarships to high school and
universities for students of families living in the Didipio Valley.
Selection is based on both equity and merit. The scholarship
program is now in its second year of implementation and
OceanaGold has committed further funding for the program
to March 2010. In 2007 the Company sponsored a total of 59
college scholarships at the Nueva Vizcaya State University
and the Quirino State Colleges and 109 high school
scholarships at the Didipio Green Valley Institute.
In addition to traditional scholarships, artisan training
programs in mechanics, welding, accounting, and other
skills have been developed for the Didipio region for
implementation in 2008. We anticipate that some of the
graduates will be employed at the mine and in nearby towns.
Students from the Didipio Green Valley Institute, Philippines. In 2007 OceanaGold provided 109 students from the high school with scholarships.
31OGC/AR/07
Goals and Targets for 2008
Company wide we have a number of community goals and
targets for the coming year, these include:
Developing a company-wide stakeholder engagement
strategy.
Developing procedures for monitoring, tracking and
reporting of community, consultation, community
investment projects and community expenditure across
the company.
At a site level we also commit to:
Macraes We will continue to hold bi-monthly meetings with
Macraes Community Incorporated – the local communities
representative group – and we will continue to consult with
local Iwi (Maori).
We will continue to organise fishing days at Macraes which
staff and the community are invited to attend.
Reefton We will continue to provide presentations to schools
and community groups focusing on all aspects of mining
including geology and the environment.
We will actively participate in the Inangahua Vision 2010
project - which covers 16 community development projects,
and assist in securing further funding for this project.
Didipio We will review and update our resettlement policy
and procedures.
We will update our relevant community agreements to ensure
that they are aligned with the relevant government guidelines.
We will continue to contribute to project Noah which aims to
plant one million trees in the next 3-5 years.
Resettlement Resettlement occurs when the local
population surrounding a proposed mine site are displaced
by the project for the duration of its lifetime. As a mine’s
lifespan can vary in length, the displacement period can
sometimes be for a significantly long period of time. We
endeavour to ensure that resettlement is only used as a last
resort and all other alternatives are investigated before this
option is used. This is a key issue for the mining sector and
one we feel should be addressed and planned for as early as
possible in a project’s life.
For Didipio, we currently exceed the provincial government
guidelines in determining compensation for excised land,
relocation onto an equivalent site and assistance for moving
chattels, livestock and belongings.
Resettlement issues are site specific and are likely to
decrease as the mine progresses from the development to
the operation phase. We realise that, in the past, resettlement
has been an area of concern for our stakeholders. As a result,
we are currently reviewing our resettlement policy and
guidelines as part of our journey towards sustainability. This
process will ensure that we use best practice procedures to
manage our performance in this area.
Health & Safety – our people are our business
32OGC/AR/07
Reality
The health and safety of our employees, contractors and the
communities in which we operate is of paramount importance
to our business. We strive to improve our health and safety
performance and seek to create an environment in which our
workforce expects an incident and injury free workplace. A
healthy and safe business is one step towards a sustainable
business, and our people are at the centre of our business.
Health and Safety Performance Each year, OceanaGold
sets ‘SMART’ improvement targets which are Specific,
Measurable, Achievable, Realistic and Time-framed.
SMART targets are set on a site by site basis by the resident
management team and Health & Safety (H&S) department.
While the company aims for zero injuries, targets are based
on industry average and historical data with the aim of
reducing the previous year’s performance.
All OH&S data is kept on a database available at each of our
sites. This allows each site to be aware of what’s happening
around the company.
Once a H&S incident occurs, the following chain of
command is followed:
Incident report filled out by the injured party
The incident report goes to the injured party’s immediate
supervisor and area superintendent who are responsible
for ensuring that root causes are identified and that
positive, preventative actions are taken.
After checking, the incident report goes to the Health &
Safety department who decide what further action should
be taken.
Each H&S incident is tabled at a daily Health & Safety
management meeting. The H&S statistics are reported to
management, including the corporate office each week, and
again on a monthly, quarterly and yearly basis. Further, the
Health & Safety department communicate the nature of the
incident and outcomes to all employees at the site where the
incident occurred.
Of particular importance this year, has been instilling our
high expectations, standards and procedures throughout the
new operations at Frasers Underground and Reefton and at
Didipio which is currently under construction.
We have worked to achieve this improvement through
training and education, regular measurement and connecting
compensation with successful health and safety improvements.
Some specific achievements are listed by site here:
New Zealand
Macraes
Retention of a tertiary level certification of the Accident
Compensation Corporation (ACC) Workplace Safety
Management Program
Standardisation of occupational health monitoring system
Increased self auditing of health and safety systems
Implementation of a ‘one strike’ drug and alcohol policy
with increased random testing
Reefton
Creation and continued implementation of an
occupational health monitoring system
Creation of a health and safety training matrix for use by
corporate trainers and department managers
Establishment of a first response emergency team
Implementation of safety observation program for
senior staff
Implementation of a ‘one strike’ drug and alcohol policy
with increased random testing
Philippines
Didipio
Submission of the Safety Management Plan for
construction to the Mines and Geosciences Bureau
for review
Appointment of a Health & Safety Manager/Contractor
for Didipio.
33OGC/AR/07
Goals and Targets for 2008
New Zealand
Continue to decrease Lost Time Injury Frequency Rate
and maintain a rate that is lower than the Australian
average.
Standardise health and safety reporting across all the
company sites.
Implement auditing of contractor compliance
to OceanaGold health and safety standards and
requirements.
First aid and basic fire fighting skills training for all
employees.
Conduct internal All Accident Cover (ACC) workplace
safety management plan audit.
Sponsor at least two mock drills at site during the year.
Require at least 90% attendance at OHSC meetings by
available members.
Philippines During 2008 Didipio will move further into the
construction phase. OceanaGold is committed to focusing on
the following areas:
Training and setting acceptable skill levels for safety
and operation.
Setting up emergency response teams.
Further development of safety procedures.
Reviewing current induction systems.
Development of positive relationships within the
mining community.
Establish a recording system computer base (currently
reviewing Vault system).
Further training in Job Safety Assessment, incident
investigation, procedure development.
Developing an Integrated Management System.
Conclusion
With our sustainability policy currently in development, we
look forward to communicating our new policy and future
achievements via our website www.oceanagold.com and via
future sustainability reports. We thank you for joining us on
this journey ”Towards Sustainability”.
Lost Time Injury Frequency Rate
New Zealand The graph below demonstrates a decrease in
the Lost Time Injury Frequency Rate (LTIFR) for New Zealand
sites combined. This compares to an Australian Industry
average of 1.1 for every 200,000 hours worked.
Of note is the 50% reduction at Macraes and the excellent
result of nil LTI at Frasers Underground Mine.
Philippines Didipio: Performance over the past year during the
construction phase has been encouraging, with statistics showing
that there were no recorded LTI, 9 Medical Treatment Injuries
(MTI) and 20 FirstAid Treatment Injury (FTI) for a total of 227,065
man hours at the site (data from March – December 2007).
This was the first year that OceanaGold monitored safety
performance at Didipio. In the future we will compare
our performance year on year and aim for continuous
improvement over time.
Training and Development
Training is the most important way that we can ensure our
workforce shares our health and safety commitments. It is the
main way to share knowledge and ensure our team members
have the skills to be able to achieve the high standards we
have reached in the past year.
Our Macraes and Reefton sites have developed a range of
training programs to improve the safety of their sites. These
programs include:
first aid training for the whole work force;
advanced first aid training for mines rescue teams;
education programs for contractors;
working with local medical providers to develop better
injury management processes and to ensure they
understand our operations.
These training programs have directly contributed to
the improvement of safety performance of our sites, as
demonstrated in the decrease in LTI’s.
In the Philippines we are working towards developing an
integrated safety and training program for the construction
phase of the project. This will involve a number of safety
modules which staff will be required to complete as part of
their on the job training.
LOST TIME INJURY FREQUENCY RATES
2.5
1.5
1.0
0.5
0
INJU
RIE
S/20
0,00
0 H
OU
RS
WO
RK
ED
04 05 06 07
2.0
03
1.56
2.00
1.25
1.20
1.02
OceanaGold’s emergency response team undergoes a simulated underground mines rescue training exercise.
Our People
ResponsibleOur operations are reinforced by a global commitment to market knowledge and experience
Board
34OGC/AR/07
James Askew Kerry McDonald Terrence Fern Joey Leviste Denham Shale Stephen Orr
Board of DirectorsJames E Askew, Chairman (appointed 6 November 2006)
James Askew is a mining engineer, with over 30 years broad
international experience as a director/chief executive officer
for a wide range of Australian and international publicly listed
mining, mining finance and other mining related companies.
He has served on the board of numerous resources public
companies, currently including Sino Gold Mining Ltd, Ausdrill
Ltd, Asian Mineral Resources Ltd and Golden Star Resources Ltd.
Mr Askew holds a Bachelor of Mining Engineering (Honours)
and a Master Degree, Engineering Science.
Mr Askew is the chairman of the Sustainability Committee and
a member of the Remuneration and Nomination Committee.
T. Kerry McDonald, Vice Chairman (appointed 24
December 2003) Kerry McDonald is chairman of the Bank
of New Zealand and BNZ Investments, deputy chairman of
Opus International Consultants Limited, a director of National
Australia Bank, National Enquiries Limited and Leighton
Contractors Pty Limited, vice president of the National Council
of the Institute of Directors, deputy chairman of the New
Zealand Institute of Economic Research, and a trustee and
board member of the New Zealand Business & Parliament Trust.
Mr McDonald holds a Masters degree with Honours in Economics
and is an Accredited Fellow of the Institute of Directors and a
Fellow of the New Zealand Institute of Management.
Mr McDonald is a member of the Audit and Financial Risk
Management Committee and chairman of the Remuneration
and Nomination Committee.
Terrence N Fern, Non-executive Director (appointed
6 November 2006) Mr Fern is chairman and managing
director of Petsec Energy Ltd. He has over 25 years of
extensive international experience in petroleum and minerals
exploration, development and financing.
Mr Fern holds a Bachelor of Science degree from The
University of Sydney and has followed careers in both
exploration geophysics and natural resource investment.
Mr Fern is a member of the Audit and Financial Risk
Management Committee and the Remuneration and
Nomination Committee.
ResponsibleExecutives
35OGC/AR/07
Ross Glossop Matthew Salthouse John Kinyon Mark Cadzow Patrick Goodfellow Darren Klinck
Jose (Joey) P Leviste Jr. - Non Executive Director
(appointed 10 December 2007) Joey Leviste is the current
chairman of OceanaGold’s wholly-owned subsidiary
company in the Philippines, OceanaGold (Philippines), Inc.
and has been a director of the Philippines company since
OceanaGold’s merger with Climax Mining in 2006. He is also
a director of Philippine Tobacco Flu-Curing Corporation
and the Philippine resident representative of the Australia-
Philippine Business Council where in 2005 he was appointed
as a commissioner to the Consultative Commission tasked
with advising the Philippines’ president on the changes
needed to the 1987 Constitution of the Philippines.
Mr Leviste graduated in economics from the Ateneo
University with an MBA degree from Columbia University
and an MA Economics degree from Fordham University in
the United States.
Mr Leviste is a member of the Sustainability Committee.
J. Denham Shale, Non-executive Director (appointed
9 February 2004) Denham Shale is a lawyer in practice in
Auckland, New Zealand. He was previously chairman of
Kensington Swan, a leading New Zealand law firm, and has
been a director of listed companies for over 20 years. Mr
Shale is currently chairman of The Farmers Trading Company
Limited Group, and a director of Turners Auctions Limited,
Eastern Hi Fi Group Limited, Munich Reinsurance Company of
Australasia Limited and several other companies.
Mr Shale has a Bachelor of Laws degree and is an accredited
fellow of the Institute of Directors in New Zealand.
Mr Shale is chairman of the Audit and Financial Risk Management
Committee and a member of the Sustainability Committee.
Stephen A Orr, Chief Executive Officer & Director
(appointed 17 August 2004) Stephen Orr has 30 years of
experience in the mining industry including international
commercial experience at both executive and operational
levels in the gold industry. Prior to his current position, Mr. Orr
was vice president, North American Operations then managing
director – Australia and Africa for Barrick Gold Corporation.
He has also previously held positions as president and chief
executive officer for Homestake Canada Inc.
Mr Orr holds a Bachelor of Science in Mining Engineering
and Masters in Business Administration.
Mr Orr currently does not hold any other directorships.
Antenor Silva – Non Executive Director (appointed
6 November 2006 and resigned 10 December 2007) During
his tenure as a Director of the Company, Antenor Silva was a
Director and Chief Operating Officer of TSX Listed Yamana
Gold Inc. Mr Silva has 40 years experience in the mining and
chemical industries. Prior to joining Yamana, Mr Silva acted
as Chief Operating Officer of Santa Elina Mines Corporation.
He has also served as a director of the boards of several
engineering, mining and aluminium extrusion companies.
Whilst acting as a Director of the Company, he was also a
director of Vaaldiam Resource Ltd. Mr Silva holds a Bachelor of
Science degree in Mining and Metallurgical Engineering from
the Universidade do Estado de Sao Paulo in San Paulo, Brazil.
Re ulate
Mark Cadzow, Vice President, Technical Services
(appointed 29 April 1991) Mark Cadzow is a metallurgist with
over 30 years experience in mineral processing, precious
metals, sulphide minerals and coal. He spent 8 years with
BP Australia in coal and mineral research and development,
which resulted in a number of patented processes for the
recovery of gold and other minerals.
Mr Cadzow joined OceanaGold in 1991 and held the position
of senior metallurgist and processing manager for 10 years
during which time he developed the Macraes processing
plant into one of Australasia’s most complex gold processing
plants. He has since become an integral member of the
management team, most recently being appointed vice
president, technical services in 2005.
He holds a Bachelor of Applied Science (Metallurgy).
Patrick Goodfellow, Vice President, Philippines
(appointed April 2007) Patrick Goodfellow has over 29 years
experience in the mining industry, with extensive experience
in project development throughout Australasia and Africa.
He was most recently Oxiana Limited’s project manager -
primary gold for the Sepon Mine in Laos.
Mr Goodfellow is responsible for OceanaGold’s business unit in
the Philippines, including the development of the Didipio Gold
and Copper ore deposit in the Didipio valley of Northern Luzon.
Darren Klinck, Vice President Corporate and Investor
Relations (appointed 23 April 2007) Darren Klinck was
previously vice president, corporate and investor relations at
Kimber Resources Inc., a gold and silver development and
exploration company listed on the American and Toronto stock
exchanges.
Mr Klinck is responsible for managing OceanaGold’s market
exposure and building relationships with investor and
financial networks internationally.
He holds a Bachelor of Commerce (Marketing).
36OGC/AR/07
ExecutivesExecutive Management (pictured on page 35)Stephen A Orr, Chief Executive Officer & Director
(appointed 17 August 2004) Profile under Directors.
Ross Glossop, Chief Financial Officer (appointed 19
January 2007) Ross Glossop has 27 years of experience in
the resources industry, where he has held positions in internal
audit, treasury, and finance with increasing managerial
responsibilities. He was most recently regional chief financial
officer for Barrick Gold Corporation’s Australia/Africa
Business Unit and was previously executive general manager
of administration with Homestake Gold Australia Limited.
Mr Glossop holds a Bachelor of Commerce, Master of
Business Administration and Master of Accounting degree. He
has extensive experience in corporate governance, including
IFRS and Sarbanes Oxley compliance requirements.
Matthew Salthouse, General Counsel and Company
Secretary (appointed 7 January 2008) Matthew Salthouse
was previously company secretary and legal counsel at
Drivetrain Systems International Pty Ltd a multi million dollar
exporter of automotive components. Before joining Drivetrain,
he was employed as a senior associate at Chambers &
Company where he consulted on various merger and
acquisition matters for large scale mining and resource
companies. He has also worked as a commercial lawyer and
legal practitioner at Coles Myer, ION Limited, Herbert Smith
and Corrs Chambers Westgarth.
Mr Salthouse holds a Bachelor of Laws and a Bachelor
Economics, Graduate Diploma of Industrial Relations and an
Advanced Certificate - Business Analysis & Valuation.
John Kinyon, Vice President, New Zealand Operations
(appointed 15 August 2005) John Kinyon has over 30 years
experience in the mining industry and joined OceanaGold
from Barrick Gold, where he was general manager, Eskay
Creek Mine operation in Northern British Columbia,
Canada. Prior to that, he spent 24 years at Homestake Mining
Company, where he held various roles in operations and
financial management.
Mr Kinyon is responsible for managing operations. He holds a
Bachelor of Science.
Our People continued
Re ulate
Corporate Governance StatementThis statement provides an outline of the main corporate
governance policies and practices that the Company had
in place in the 2007 financial year. Its purpose is to enhance
and protect shareholder value, ensure risks are managed
appropriately and maintain stakeholder confidence in the
integrity of the Company. The Company has an established
governance system that is designed to comply with the
regulatory requirements applicable in Australia, Canada and
New Zealand. Further details are set out below.
1. AustraliaThe Board believes that the Company substantially complies with
the ASX Corporate Governance Council’s Principles of Good
Corporate Governance and Best Practice Recommendations
(“Principles”). Refer ASX website www.asx.com.au.
A summary of the Company’s current corporate governance
practices is set out below. Further information on corporate
governance policies and practices is available on the
company’s website: www.oceanagold.com
Set out below are specific matters to note in relation to the
Company’s adoption of the Principles.
1.1 Lay solid foundations for management
and oversight
The Board is responsible for providing strategic direction,
defining broad issues of policy and overseeing the
management of the Company to ensure it is conducted
appropriately and in the best interests of shareholders.
In summary, the Board is responsible for the management
of the affairs of the company, including its financial and
strategic objectives; evaluating, approving and monitoring the
Company’s strategic and financial plans; evaluating, approving
and monitoring the Company’s annual budgets and business
plans; evaluating, approving and monitoring major capital
expenditure, capital management and all major corporate
transactions, including the issue of the Company’s securities;
37OGC/AR/07
Corporate Governance and approving all financial reports and material reporting and
external communications by the Company in accordance with
the Company’s Shareholder Communications Policy.
The Board has delegated certain responsibilities and
authorities to the Managing Director and his executive
team to enable them to conduct the Company’s day-to-
day activities, subject to certain limitations set out in an
authorisation policy approved by the Board. Matters that are
beyond the scope of those limitations require Board approval.
There is a formal charter documenting the membership and
operating procedures of the Board and the apportionment of
responsibilities between the Board and management. A copy
of the Board charter is available from the Company’s website.
1.2 Structure the Board to add value
Board composition
As at the end of the period under review, the Board
comprised five non-executive directors (including the
Chairman) and one executive director (the Chief Executive
Officer), who provide an appropriate mix of business and
specialist skills and qualifications. During this period, the
composition of the Board was as follows:
James E Askew (Chairman and non-executive director);
T. Kerry McDonald (Vice Chairman and non-executive director);
Stephen A Orr (Chief Executive Officer);
J. Denham Shale (non-executive director);
Terence N Fern (non-executive director);
Jose P Leviste, Jr (from 10 December 2007)
(non-executive director since appointment); and
Antenor Silva (until 10 December 2007)
(former non-executive director).
Independence of non-executive directors
The Board charter requires the Board to assess the
independence of the Company’s non-executive directors
by reference to the criteria suggested in Recommendation
2.1 of the Principles (www.asx.com.au). These criteria are
considered subject to the materiality thresholds set by the
Board from time to time. The general standard for materiality
is, in the case of service providers or similar, that the fees to
the firm from the Company do not represent more than 5% of
the firm’s total fees, nor more than 5% of the Company’s total
g
38OGC/AR/07
spend in this area and the relevant director does not receive
any remuneration directly related to the Company’s use of
the firm i.e. ‘finders fee’. The Board Charter also requires
the Board to assess the independence of the Company’s
non-executive directors by reference to the Principles. The
Board may determine a director to be independent so long
as the director retains the ability and willingness to operate
independently and objectively and to challenge the Board and
management, notwithstanding the existence of a relationship
listed in Box 2.1 of the Principles (www.asx.com.au).
Save in respect of the former director, Mr Antenor Silva,
the Board has assessed the non-executive directors to be
independent in the manner contemplated by the Board
charter. Accordingly, as at the date of this report, the
Board comprises a majority of independent, non-executive
directors. Mr Silva was not considered to be independent
because he represents interests associated with Santa Elina
Mines Corporation and Sercor Limited, which together held a
material interest in the issued share capital of the Company.
Director profiles
Directors’ qualifications, experience, dates of appointments
and details of other listed company directorships are outlined
on pages 34 and 35.
Term of appointment of non-executive directors
In accordance with the Articles of the Company, the directors
of the Company shall be elected and shall retire in rotation,
with three directors subject to election at each annual general
meeting of shareholders of the Company held to elect
directors. When elected directors will hold office for a term
of two years from the date of their election or until the second
annual general meeting of shareholders following such date,
whichever is earlier. At the next following annual general
meeting of the shareholders of the Company held to elect
directors, the three directors not elected at the prior meeting
shall be nominated for re-election to hold office for a term
of two years from the date of their election, until the second
annual general meeting of shareholders following such date
or until his or her successor is duly elected or appointed.
Independent advice
Directors are entitled to seek independent professional
advice, at the Company’s expense, to assist them in fulfilling
their responsibilities, subject to obtaining the prior approval
of the Chairman. Any such advice must be made freely
available to all directors.
Committees of the Board
The Board has also established three committees to assist the
Board in discharging its responsibilities as follows:
Audit and Financial Risk Management Committee;
Remuneration and Nomination Committee; and
Sustainability Committee.
Each committee is governed by a formal charter approved
by the Board, documenting the committee’s composition and
responsibilities. Copies of these charters are available from
the Company’s website.
The Audit and Financial Risk Management Committee’s
primary responsibility is to oversee the Company’s financial
reporting process, financial risk management systems
and internal control structure. It also reviews the scope
and quality of the Company’s external audits and makes
recommendations to the Board in relation to the appointment
or removal of the external auditor. The members of the Audit
Committee during the year under review were:
J D Shale (Chairman);
T K McDonald; and
T N Fern.
The Remuneration and Nomination Committee is
responsible for making recommendations to the Board
in relation to the remuneration arrangements for the
Managing Director, for reviewing and approving the
Managing Director’s remuneration recommendations for
senior executives and for reviewing and approving the
general remuneration framework for other employees.
The Committee is also responsible for ensuring that an
appropriate mix of skills, experience and expertise is
maintained on the Board, and for evaluating the performance
of the Board, individual directors and the Board committees.
The members of the Remuneration and Nomination
Committee during the period under review were:
T K McDonald (Chairman);
J E Askew; and
T N Fern.
The Sustainability Committee is responsible for reviewing
and making recommendations to the Board in respect of
the management of technical risk and the furtherance of
the Company’s commitments to environmentally sound
and responsible resource development and a healthy and
safe work environment. During the period under review,
members of the Sustainability Committee were as follows:
J E Askew (Chairman);
J D Shale;
A Silva (until 10 December 2007);
J P Leviste Jr (from 10 December 2007).
Each Committee contained a majority of independent non-
executive directors at all times during the period under review.
It is customary for the Chairman to invite Company executives
(including the CEO) to attend Committee meetings.
Participation in Board and Committee meetings
For the period under review, Director’s participation in
meetings of the Board and sub-committees is summarised in
the table opposite.
Corporate Governance continued
39OGC/AR/07
1.3 Promote ethical and responsible
decision making The Board supports high standards of ethical behaviour and
requires all directors, employees and contractors to act with
integrity at all times.
The Company has both a Corporate Code of Conduct and a
Directors Code of Conduct that seek to foster high standards
of ethics and accountability among directors, employees
and contractors in carrying out the Company’s business.
The Codes provide guidance on a variety of matters such as
expected standards of behaviour, confidentiality, securities
dealing, public statements, use of Company property,
conflicts of interest, financial reporting.
The Codes are supplemented by formal policies and
procedures in relation to matters such as health and safety,
environment and community, discrimination, harassment and
bullying, diversity and equal opportunity and investor relations.
Specific issues of note are summarised below:
Directors’ conflicts of interest - directors of the Company
must keep the Board advised, on an ongoing basis, of any
material personal interest in a matter that relates to the affairs
of the Company. Where a director has a material personal
interest in a matter, the director concerned will absent
himself from Board discussions of the matter and will not cast
a vote in relation to the matter; and
Securities trading policy - the Company’s comprehensive
securities dealing policy applies to all directors, employees
and contractors. The policy prohibits trading in the Company’s
securities by directors, employees or contractors at any time
when they are in possession of price sensitive information that
is not generally available to the market. In addition, the policy
places a total embargo on short term trading by directors and
senior employees at all times. The policy further identifies
“blackout” periods where directors and senior management
are embargoed from dealing in the Company’s securities. An
internal disclosure procedure applies to directors and senior
employees wishing to buy or sell Company securities or
exercise options over Company securities. Directors also have
specific disclosure obligations under laws and regulations
applicable in Australia and Canada.
Further details of each policy can be found on the
Company’s website.
1.4 Safeguard integrity in financial reportingAs noted above under section 1.2, the Company has established
an Audit and Financial Risk Management Committee to oversee
financial reporting and safeguard integrity.
Details of the Audit and Financial Risk Management Committee
membership and meetings attended are set out in section 1.2.
1.5 Make timely and balanced disclosureThe Company has developed a number of policies and
procedures to ensure timely and balanced disclosure to
stakeholders. Key principles are summarised below:
Financial reporting policy - the Board requires the Chief
Executive Officer and Chief Financial Officer to confirm in
writing, on an annual basis, that the Company’s financial
reports present a true and fair view of the Company’s
financial position and performance, have been prepared in
accordance with relevant accounting standards and are based
on the Company’s internal systems of financial control and
compliance; and
Continuous disclosure policy - the Company complies with
its continuous disclosure obligations by ensuring that price
sensitive information is identified, reviewed by management
and disclosed to applicable listing regulators in a timely
manner and that all such information is posted on the
Company’s website as soon as possible after disclosure. The
Company Secretary manages compliance with the Company’s
continuous disclosure obligations and communications with
applicable listing regulators.
Copies of the policy and guidelines can be found on the
Company’s website.
1.6 Respect the rights of shareholdersThe Board aims to ensure that shareholders are kept informed
of all major developments affecting the Company by
communicating information through continuous disclosure,
periodic reporting, investor briefings and presentations at
the Company’s annual general meetings. The Company posts
public announcements, notices of general meetings, reports
to shareholders, presentations and other investor-related
information on the Company’s website.
Shareholders are encouraged to attend all meetings or, if
unable to attend, to vote on the resolutions proposed by
appointing a proxy.
Board of Directors*
Audit and Risk Committee*
Remuneration and Nomination Committee*
Sustainability Committee*
Director
Number Held*
Number Attended
Number Held*
Number Attended
Number Held*
Number Attended
Number Held*
Number Attended
J E Askew 9 9 - Non-member 4 4 3 3T K McDonald 9 9 8 7 4 4 - Non-memberS A Orr 9 8 8 8 4 3 3 3J D Shale 9 9 8 8 - Non-member 3 3T Fern 9 8 8 6 4 4 - Non-memberJ P Leviste Jr 0 0 - Non-member - Non-member 0 0A Silva 9 3 - Non-member - Non-member 3 1
* For the purposes of this Statement, the table includes participation in meetings of the Company and also OceanaGold Limited prior to implementation of the scheme of arrangement.
Revenue
The Company’s auditor attends each annual general meeting
and is available to answer questions about the conduct of the
audit and the preparation and contents of the auditor’s report.
Applicable policies are available on the Company’s website.
1.7 Recognise and manage riskThe Board is responsible for risk oversight and management,
and is assisted in the discharge of its responsibilities
in relation to risk by both the Audit Committee and the
Sustainability Committee.
Day-to-day responsibility for risk oversight and management
is delegated to the Chief Executive Officer, who is primarily
responsible for identifying risks, monitoring risks, promptly
communicating risk events to the Board and responding
to risk events. Communication to investors of any material
changes to the Company’s risk profile is covered by the
Company’s continuous disclosure policy.
The Company’s risk management framework includes
various internal controls and written policies, such as policies
regarding authority levels for expenditure, commitments
and general decision making and policies and procedures
relating to health, safety and environment designed to ensure
a high standard of performance and regulatory compliance.
In addition to these systems, the Company is currently
reviewing and updating internal control procedures to,
amongst other matters, ensure compliance with Canadian
regulatory requirements.
As mentioned above, the Board requires the Chief Executive
Officer and Chief Financial Officer to confirm in writing, on an
annual basis, that the Company’s financial reports are based
upon a sound risk management policy.
1.8 Encourage enhanced performanceThe performance of the Chief Executive Officer and senior
executives is evaluated as part of the Company’s system for
reviewing the performance of all employees on an annual basis.
The Board is committed to carrying out periodic performance
evaluations of the Board, individual non-executive directors
and Board committees. However, this did not occur during
the period under review due to the significant re-organisation
of the affairs of the Company. A description of the process
for performance evaluation of the Board, its committees and
individual directors can be found in the Remuneration and
Nomination committee charter on the Company’s website.
1.9 Remunerate fairly and responsiblyAs noted above, the Remuneration and Nomination
Committee Charter is disclosed on the Company’s website.
This Charter forms the basis for Company remuneration
policies and procedures.
Details of Remuneration and Nomination Committee
composition attendance are set out above in section 1.2.
As the Company is incorporated in Canada, it is not required
to comply with section 300A of the Corporations Act or
Accounting Standard AASB 124 Related Party Disclosures.
The Company is however required under Canadian
law to provide details on director and senior executive
compensation arrangements and these details can be found
in the Management Proxy Circular. Whilst these disclosures
are not materially the same as would otherwise be disclosed
if the Company were incorporated in Australia and regulated
by the Corporations Act, the Company regards such
disclosures as providing shareholders with an appropriate
level of information.
1.10 Recognise the legitimate interests
of stakeholdersAs noted above and amongst other protocols, the Company
has established a Corporate Code of Conduct to recognise
the interests of all stakeholders. A copy of this Code is
available on the Company’s website.
In addition to the above and as a pre-condition to initial listing
on the ASX, the Company notes as follows:
the Company’s jurisdiction of incorporation is British
Columbia, Canada;
the Company is not subject to Chapters 6, 6A, 6B or 6C of
the Corporations Act; and
no limitations have been placed on the acquisition of
securities in the place of incorporation.
2. CanadaIn addition to Australian requirements, the Company also
complies with specific Canadian corporate governance
obligations. In accordance with Canadian requirements,
specific disclosures are contained in our Proxy Circular,
furnished to shareholders in connection with our upcoming
shareholders’ meeting.
3. New ZealandNew Zealand shareholders should note that the Company
is listed with the Toronto Stock Exchange (TSX) as its
home exchange. The TSX corporate governance rules and
principles may materially differ from the New Zealand
Exchange Limited (NZX) corporate governance rules and
the principles of the Corporate Governance Best Practice
Code of NZX. More information about the corporate
governance principles of TSX is available from the TSX
website at www.tsx.com.
Corporate Governance continued
40OGC/AR/07
Revenue
Contents 42 Management’s Responsibility for the Financial Statements
33 Auditors’ Report
44 Consolidated Balance Sheets
45 Consolidated Statements of Operations / (Loss)
45 Consolidated Statements of Retained Earnings / (Loss)
45 Consolidated Statements of Comprehensive Income / (Loss)
46 Consolidated Statements of Cash Flows
47 Notes to and Forming Part of the Financial Statements
Financial Statements
41OGC/AR/07
Management’s Responsibility for Financial Reporting
The accompanying consolidated financial statements of
OceanaGold Corporation were prepared by management in
accordance with Canadian generally accepted accounting
principles. Management acknowledges responsibility for the
preparation and presentation of the consolidated financial
statements, including responsibility for significant accounting
judgments and estimates and the choice of accounting principles
and methods that are appropriate to OceanaGold Corporation
and the entities it controls (“the Group’s”) circumstances. The
significant accounting policies of the Group are summarized in
note 2 to the consolidated financial statements.
Management has established systems of internal control
over the financial reporting process, which are designed
to provide reasonable assurance that relevant and reliable
financial information is produced.
Ernst and Young, the Group’s independent auditors,
conduct an audit of the consolidated financial statements
in accordance with Canadian generally accepted auditing
standards. Their audit includes an examination, on a test
basis, of evidence supporting the amounts and disclosures
in the financial statements. As well, they make an assessment
of the accounting principles used and significant estimates
made by management and they evaluate the overall financial
statement presentation.
The Board of Directors is responsible for reviewing and
approving the consolidated financial statements and for
ensuring that management fulfils its financial reporting
responsibilities. An Audit and Financial risk management
Committee assists the Board of Directors in fulfilling this
responsibility. The members of the Audit and Financial risk
management Committee are not officers of the Group. The
Audit and Financial risk management Committee meets
with management as well as with the independent auditors
to review the internal controls over the financial reporting
process, the consolidated financial statements and the
auditors’ report. The Audit and Financial risk management
Committee reports its findings to the Board of Directors for
its consideration in approving the consolidated financial
statements for issuance to the shareholders.
Management recognizes its responsibility for conducting
the Group’s affairs in compliance with established financial
standards, and applicable laws and regulations, and for
maintaining proper standards of conduct for its activities.
Stephen A Orr Ross Glossop
Chief Executive Officer Chief Financial Officer
Melbourne, Australia Melbourne, Australia
28 February, 2008 28 February, 2008
42OGC/AR/07
43OGC/AR/07
To the Shareholders of OceanaGold Corporation
We have audited the consolidated balance sheets of
OceanaGold Corporation as at December 31, 2007 and
2006 and the consolidated statements of operations and
retained earnings / (accumulated deficit), comprehensive
loss and cash flows for the two years then ended. These
financial statements are the responsibility of the company’s
management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with Canadian
generally accepted auditing standards. Those standards
require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation.
In our opinion, these consolidated financial statements
present fairly, in all material respects, the financial position
of the company as at December 31, 2007 and 2006 and the
results of its operations and its cash flows for the two years
then ended in accordance with Canadian generally accepted
accounting principles.
“Ernst & Young”
Chartered Accountants
Melbourne, Australia
27 February 2008
44OGC/AR/07
Notes Consolidated Consolidated2007 2006
(in thousands of United States dollars) $’000 $’000
As at December 31, 2007 and 2006
Assets
Current assets
Cash and cash equivalents 119 837 80 025
Accounts receivable and other receivables 8 3 426 2 488
Inventories 10 20 937 10 498
Prepayments 945 508
Future income tax assets 6 33 595 22 894
Derivatives 21 5 181 4 298
Total current assets 183 921 120 711
Non-current assets
Accounts receivable and other receivables 8 - 26
Inventories 10 23 953 21 452
Property, plant and equipment 11 196 320 155 032
Mining assets 12 415 723 316 338
Future income tax assets 6 2 656 -
Derivatives 21 - 10 170
Total non-current assets 638 652 503 018
Total assets 822 573 623 729
Liabilities and shareholders’ equity
Current liabilities
Accounts payable and accrued liabilities 26 422 14 700
Asset retirement obligation 293 -
Derivatives 21 118 618 73 978
Employee benefits 20 2 291 1 550
Interest-bearing loans and borrowings 14 18 687 957
Total current liabilities 166 311 91 185
Non-current liabilities
Other obligations 7 717 3 466
Employee benefits 20 - 81
Interest-bearing loans and borrowings 14 198 912 140 652
Future income tax liabilities 6 86 250 90 763
Asset retirement obligation 13 9 218 8 422
Total non-current liabilities 302 097 243 384
Total liabilities 468 408 334 569
Shareholders’ equity
Capital stock 15 334 975 246 146
Retained earnings/(accumulated deficit) (56 791) 11 768
Contributed surplus 17 32 379 28 171
Accumulated other comprehensive income 16 43 602 3 075
Total shareholders’ equity 354 165 289 160
Total liabilities and shareholders’ equity 822 573 623 729
Contingencies (note 25) Commitments (note 24)
Approved by the Board of Directors:
James Askew J Denham Shale Director Director
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Balance Sheets
45OGC/AR/07
Notes Consolidated Consolidated2007 2006
(in thousands of United States dollars except per share amounts) $’000 $’000
For the years ended December 31, 2007 and 2006
Revenue
Gold sales 104 395 94 750
Release from other comprehensive income of deferred unrealised loss on designated hedges
(16 407)
(27 684)
87 988 67 066
Cost of sales, excluding depreciation and amortisation (81 669) (72 684)
Depreciation and amortisation (28 790) (14 031)
General & administration (11 632) (5 906)
Operating loss (34 103) (25 555)
Other expenses
Interest expense (19 414) (6 594)
Foreign exchange loss (2 661) (306)
(22 075) (6 900)
(Loss) on fair value of undesignated hedges (45 847) (5 079)
Interest revenue 6 712 2 618
Other income 5 91 148
(Loss) before income taxes (95 022) (34 768)
Income tax recovery 6 25 983 11 341
Net (loss) (69 039) (23 427)
Net (loss) per share: 7
- basic ($0.47) ($0.29)
- diluted ($0.47) ($0.29)
Retained earnings at beginning of year 11 768 35 195
Net (loss) (69 039) (23 427)
Other 480 -
Retained earnings / (accumulated deficit) at end of year (56 791) 11 768
Net (loss) (69 039) (23 427)
Other comprehensive income for the year, net of tax:
Cash flow hedge gain 16 9 857 1 383
Currency translation differences 16 30 670 7 169
40 527 8 552
Comprehensive (loss) (28 512) (14 875)
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Statements of Operations
Consolidated Consolidated2007 2006
(in thousands of United States dollars) $’000 $’000
Statements of retained earnings / (accumulated deficit)
For the years ended December 31, 2007 and 2006
Notes Consolidated Consolidated2007 2006
(in thousands of United States dollars) $’000 $’000
Statements of comprehensive (loss)
For the years ended December 31, 2007 and 2006
46OGC/AR/07
Consolidated Consolidated2007 2006
(in thousands of United States dollars) $’000 $’000
For the years ended December 31, 2007 and 2006
Operating activities
Net (loss) (69 039) (23 427)
Charges/(credits) not affecting cash
Depreciation and amortisation expense 28 790 14 031
Net (gain) on disposal of property, plant and equipment (179) (35)
Non-cash interest charges 7 787 1 002
Foreign exchange (gains)/losses 1 163 -
Stock based compensation charge 1 565 300
Non-cash derivative expenses 62 254 33 621
Future tax (benefit) (25 983) (11 341)
Changes in non-cash working capital
Accrued interest receivable - (228)
(Increase) in accounts receivable and other receivables (520) (1 891)
(Increase)/decrease in inventory (9 782) 4 933
(Decrease)/increase in taxes payable - (264)
(Decrease)/increase in accounts payable 10 548 (1 939)
(Decrease)/increase in other provisions 4 071 1 286
Net cash provided by operating activities 10 675 16 048
Investing activities
Proceeds from sale of property, plant and equipment 330 596
Payments for property, plant and equipment (43 630) (48 852)
Payments for mining assets: exploration and evaluation (27 282) (3 313)
Payments for mining assets: development (15 435) (2 677)
Payments for mining assets: in production (32 658) (2 841)
Net cash acquired in business combination - 7 561
Net cash used for investing activities (118 675) (49 526)
Financing activities
Proceeds from issue of shares 94 702 320
Payment of share issues costs (9 023) -
Payment of capital lease liabilities (1 808) (6 706)
Proceeds from capital lease 12 651 13 101
Proceeds from issue of convertible notes 24 213 57 870
Proceeds from other borrowings 20 021 9 820
Net cash provided by financing activities 140 757 74 405
Effect of exchange rate changes on cash and cash equivalents
7 055
4 282
Net increase in cash and cash equivalents 39 812 45 209
Cash and cash equivalents at beginning of year 80 025 34 816
Cash and cash equivalents at end of year 119 837 80 025
Cash interest paid (11 627) (5 592)
The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements.
Statements of Cash Flows
47OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
For the years ended December 31, 2007 and 2006
1 Nature of operationsOceanaGold Corporation (“OceanaGold”) is engaged in exploration and the development and operation of gold and other mineral mining activities. OceanaGold is a significant gold producer and is operating two open cut mines at Macraes and Reefton in New Zealand and nearing the completion of the development of the new Frasers underground mine. Since the November 6, 2006 acquisition of Climax Mining Ltd (“Climax”) the group has added the Didipio Gold-Copper Project in the Philippines to its development portfolio.
2 Summary of significant accounting policiesThe consolidated financial statements of OceanaGold Corporation (“the Group”, also referred to as “consolidated entity”, “we”, “us” and “our”) are prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”).
Basis of presentationThe consolidated financial statements include the financial statements of the parent entity, and its controlled entities.
All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full.
Controlled entities are consolidated from the date on which control is transferred to the consolidated entity and cease to be consolidated from the date on which control is transferred out of the consolidated entity.
On June 25, 2007, the Company acquired all the outstanding shares of Oceana Gold Ltd (Oceana) through a share exchange (the “Share Exchange”). As a result of the Share Exchange, the former shareholders of Oceana became shareholders of OceanaGold. The transaction has been accounted for as an Exchange of Ownership Interests between Entities under Common Control and has been accounted for under the continuity of interests method and thus did not result in any change in the reported net assets. The results of operations have been presented as if Oceana and OceanaGold were historically the same entity and thus the financial statements include the results of operations for Oceana until June 25, 2007 and for the consolidated entity for the period subsequent to June 25, 2007.
Foreign currency translationThese consolidated financial statements are expressed in United States dollars (“US$”). The controlled entities of OceanaGold have either Australian dollars (“A$”) or New Zealand dollars (“NZ$”) as their functional currency. The financial statements of the Group have been translated to US$ using the current rate method described below.
The Group employs the current rate method of translation for its self-sustaining operations. Under this method, all assets and liabilities are translated at the year-end rates and all revenue and expense items are translated at the average monthly exchange rates for recognition in income. Differences arising from these foreign currency translations are recorded in shareholders’ equity as a cumulative translation adjustment until they are realised by a reduction in the net investment.
The Group employs the temporal method of translation for its integrated operations. Under this method, monetary assets and liabilities are translated at the year-end rates and all other assets and liabilities are translated at applicable historical exchange rates. Revenue and expense items are translated at the rate of exchange in effect at the date the transactions are recognized in income, with the exception of depreciation and amortisation which is translated at the historical rate for the associated asset. Exchange gains and losses and currency translation adjustments are included in income.
EstimatesThe preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and related notes. Significant areas where management’s judgement is applied include ore reserve and resource determinations, exploration and evaluation assets, mine development costs, plant and equipment lives, contingent liabilities, current tax provisions and future tax balances and asset retirement obligations. Actual results may differ from those estimates.
Cash and cash equivalentsCash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with a remaining maturity of three months or less at the date of purchase.
Trade and other receivablesTrade receivables are initially recorded at the amount of contracted sales proceeds, and then subsequently carried at cost less an allowance for doubtful accounts.
InventoriesBullion and oreInventories are valued at the lower of weighted average cost and net realisable value. Costs include mining and production costs as well as commercial, environmental, health and safety expenses, and stock movements.
Gold in circuitGold in circuit is valued at the lower of weighted average cost and net realisable value. The average cash cost of production for the month is used and allocated to gold that is in the circuit at period end. These costs include mining and production costs as well as commercial, environmental, health and safety expenses, and stock movements.
StoresInventories of consumable supplies and spare parts are valued at the lower of cost and net realisable value. Cost is assigned on a weighted average basis.
Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation. All such assets, except freehold land, are depreciated over their estimated useful lives on a straight line, reducing balance or units of production basis, as considered appropriate, commencing from the time the asset is held ready for use.
Depreciation rates used: Buildings 5% per annum straight line Mining equipment unit of production based on economically recoverable resources Other plant and equipment 8% - 33% per annum straight line 20% - 30% per annum reducing balance
Impairment The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the undiscounted future cash flows from these assets, the assets are written down to fair value.
48OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Exploration, Evaluation, Development and Restoration CostsExploration and Evaluation ExpenditureExploration and evaluation expenditure is stated at cost and is accumulated in respect of each identifiable area of interest.
Such costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area of interest (or alternatively by its sale), or where activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable resources, and active work is continuing.
Accumulated costs in relation to an abandoned area are written off to the statement of operations in the period in which the decision to abandon the area is made.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.
Mining Properties in Production or Under DevelopmentMining properties in production (including exploration, evaluation and development expenditure) are accumulated and brought to account at cost less accumulated amortisation in respect of each identifiable area of interest. Amortisation of capitalised costs, including the estimated future capital costs over the life of the area of interest, is provided on the units of production basis, proportional to the depletion of the mineral resource of each area of interest expected to be ultimately economically recoverable.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Should the carrying value of expenditure not yet amortised exceed its estimated recoverable amount, the excess is written off to the statement of operations.
ImpairmentThe carrying values of exploration, evaluation and development costs are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the undiscounted future cash flows from these assets, the assets are written down to fair value.
Asset Retirement ObligationsThe Group recognises the fair value of a future asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from the acquisition, construction, development and/or normal use of the assets. The Group concurrently recognises a corresponding increase in the carrying amount of the related long-lived asset that is depreciated over the life of the asset. The key assumptions on which the fair value of the asset retirement obligations are based include the estimated future cash flow, the timing of those cash flows and the credit-adjusted risk-free rate or rates on which the estimated cash flows have been discounted. Subsequent to the initial measurement the liability is accreted over time through periodic charges to earnings. The amount of the liability is subject to re-measurement at each reporting period if there has been a change to certain of the key assumptions.
Trade and other payablesTrade payables and other payables are carried at cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Interest-bearing loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at cost using the effective interest method by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the statement of operations when the liabilities are derecognised and through the amortisation process.
Convertible notesFor convertible notes, the component of the convertible note that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs.
On issuance of the convertible note, the fair value of the liability component is determined using a market rate for an equivalent non-convertible note and this amount is carried as a long-term liability on the amortised cost basis until extinguished on conversion. The increase in the liability due to the passage of time is recognised as a finance cost.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of transaction costs. The carrying amount of the conversion option is not re-measured in subsequent years.
Interest on the liability component of the convertible note is recognised as an expense in profit or loss.
Transaction costs are apportioned between the liability and equity components of the convertible note based on the allocation of proceeds to the liability and equity components when the instrument is first recognised.
Employee benefitsA liability is recognised for employee benefits accumulated as a result of employee services up to the reporting date. These employee benefits include wages and salaries, annual leave, and long service leave, and include related costs such as payroll tax and workers compensation insurance.
A liability is recognised for annual leave and the current portion of long service leave together with the associated employment costs are measured at their nominal amounts based on remuneration rates expected to be paid when the liability is settled. The non-current portions of long service leave and its associated employment on-costs are measured at the present value of estimated future cash flows.
Contributions to defined contribution superannuation plans are expensed as incurred.
Stock based compensationThe consolidated entity provides benefits to employees (including directors) in the form of stock based compensation transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
There are currently two plans in place to provide these benefits:
(i) The Executive Share Options Plan (“ESOP”), which provides benefits to the managing director and senior executives, and(ii) The Employee Share Acquisition Plan (“ESAP”), which provides benefits to all employees, excluding directors.
Notes
49OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
For the years ended December 31, 2007 and 2006
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value of options issued is determined by an external valuer using a binomial model, combined with Monte Carlo simulation for those options where there is a market performance hurdle.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of OceanaGold (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:
(i) the extent to which the vesting period has expired, and(ii) the number of awards that, in the opinion of the directors of the consolidated entity, will ultimately vest.
This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.
LeasesThe determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.
Capital leases, which transfer to the consolidated entity substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as the lease income.
Operating lease payments are recognised as an expense in the statement of operations on a straight-line basis over the lease term.
Derivative financial instruments and hedge accountingThe consolidated entity benefits from the use of derivative financial instruments to manage commodity price and foreign currency exposures.
Derivative financial instruments are initially recognised in the balance sheet at fair value and are subsequently re-measured at their fair values.
The fair value of forward gold instruments is calculated by discounting the future value of the forward contract at the appropriate prevailing quoted market rates at reporting date. The fair value of forward exchange contracts is calculated by reference to current forward exchange contracts with similar maturity profiles.
The Group applies Section 3855 “Financial Instruments – Recognition and Measurement”, Section 3865 “Hedges” and Section 1530 “Comprehensive Income” (see note 3), and certain derivative financial instruments have been designated as hedges under the requirements of Section 3865. For the purposes of hedge accounting, hedges are classified as either fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability; or cash flow hedges where they hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction.
The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged.
At the inception of the transaction, the consolidated entity documents the relationship between the hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific forecast gold sales.
Changes in the fair value of derivatives that are designated against future production, qualify as cash flow hedges and if deemed highly effective, the gain or loss on the effective portion is recognised in accumulated other comprehensive income. The ineffective portion is recognised in the statement of operations. Amounts deferred in accumulated other comprehensive income are transferred to the statement of operations and classified as revenue in the same periods during which the hedged gold sales affect the statement of operations.
Certain derivative instruments do not qualify for hedge accounting or have not been accounted for as fair value or cash flow hedges. Changes in the fair value of these derivative instruments are recognised immediately in the statement of operations.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in accumulated other comprehensive income at that time remains in other comprehensive income and is recognised when the committed or forecasted production is ultimately recognised in the statement of operations. However, if the committed or forecasted production is no longer expected to occur, the cumulative gain or loss reported in other comprehensive income is immediately transferred to the statement of operations.
When the hedged firm commitment results in the recognition of an asset or a liability, the associated gains or losses, previously recognised in accumulated other comprehensive income are included in the initial measurement of the acquisition cost or other carrying amount of the asset or liability. Cash received or paid on the settlement or maturity of (gold derivatives) are recorded as operating cash flows.
50OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Bullion salesRevenue from sales of gold and silver is recognised when there has been a passing of the significant risks and rewards of ownership, which means the following:
- The product is in a form suitable for delivery and no further processing is required by, or on behalf of the consolidated entity;- The quantity and quality (grade) of the product can be determined with reasonable accuracy;- The product has been despatched to the customer and is no longer under the physical control of the consolidated entity (or title of the product has earlier
passed to the customer);- The selling price is determinable;- It is probable that the economic benefits associated with the transaction will flow to the consolidated entity; and- The costs incurred or to be incurred in respect of the transaction are determinable.
Borrowing costsBorrowing costs are expensed as incurred with the exception of borrowing costs directly associated with the construction, purchase or acquisition of a qualifying asset, which are capitalised as part of the cost of the asset.
Income taxThe Group follows the liability method of income tax allocation. Under this method, future tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the substantially enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided to the extent that it is more likely than not those future income tax assets will not be realised.
Earnings per shareBasic loss per share is calculated by dividing the loss by the weighted average number of shares outstanding during the year. Diluted loss per share is calculated by dividing the loss by the weighted-average number of shares outstanding during the year, assuming that all potentially dilutive securities were exercised, if dilutive.
3 Adoption of new accounting standardsDeferred StrippingEffective January 1 2007, the Company adopted, on a prospective basis, the new recommendations of the Canadian Institute of Chartered Accountants with respect to stripping charges, EIC 160 Stripping Costs Incurred in the Production Phase of a Mining Operation. The new recommendations require the costs associated with the removal of overburden and other mine waste materials that are incurred in the production phase of mining operations to be included in the costs of inventory produced in the period in which they are incurred, except when the charges represent a betterment to the mineral property. Charges represent a betterment to the mineral property when the stripping activity provides access to reserves that will be produced in future periods that would not have been accessible without the stripping activity. When charges are deferred in relation to a betterment, the charges are amortized over the reserve accessed by the stripping activity using the units of production method.
As at 31 December 2007 the balance of capitalized pre production stripping costs was $23,868,000.
These policies have been applied prospectively and prior years’ financial statements have not been restated.
4 Impact of future accounting standardsThe new accounting standards take effect from 1 January 2008. Below are the standards that affect the financials of OceanaGold.
Section 1535 – Capital DisclosuresThis section establishes standards for disclosing information about a company’s capital and how it is managed. Under this standard the company will be required to disclose the following, based on the information provided internally to the company’s key management personnel:
(i) qualitative information about its objectives, policies and processes for managing capital:(ii) summary quantitative data about what it manages as capital:(iii) whether during the period it complied with externally imposed capital requirements to which it is subject: and(iv) when the company has not complied with such externally imposed capital requirements, the consequences of such non-compliance.
The company is in a position to comply with this standard and believe there will be no material effect on the financials.
Section 3031 – InventoriesThis section prescribes the accounting treatment for inventories and provides guidance on the determination of costs and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories.
The company is already in compliance with this standard.
Section 3862 – Financial Instruments – disclosuresThis section requires entities to provide disclosure of quantitative and qualitative information in their financial statements that enable users to evaluate (a) the significance of financial instruments for the entity’s financial position and performance; and (b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date, and management’s objectives, policies and procedures for managing such risks. Entities will be required to disclose the measurement basis or bases used, and the criteria used to determine classification for different types of instruments.
The section requires specific disclosures to be made, including the criteria for:
(i) designating financial assets and liabilities as held for trading;(ii) designating financial assets as available for sale; and(iii) determining when impairment is recorded against the related financial asset or when an allowance account is used.
The company is in a position to comply with this standard and believe there will be no material effect on the financials.
Notes
51OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
For the years ended December 31, 2007 and 2006
5 Other income
Other incomeGain on disposal of property, plant and equipment 179 35Other 112 113Total other income 291 148
6 Income taxMajor components of income tax expense/benefit:
Statement of operationsFuture income taxFuture income tax benefit relating to tax losses carried forward (27 065) (7 597)Adjustments in respect of future income tax of previous years 1 370 (222)Relating to origination and reversal of temporary differences (288) (3 522)Income tax (benefit)/expense reported in statement of earnings/(loss) (25 983) (11 341)
Numerical reconciliation between aggregate tax expense/benefit recognised in the income tax statement and the tax expense/benefit calculated per the statutory income tax rateA reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Consolidated entity’s effective income tax rate for the years ended December 31 is as follows:
Accounting (loss) before tax from continuing operations (95 022) (34 768)
At the statutory income tax rate of 34.12% (2006 30%) (32 422) (10 430)Adjustments in respect of current income tax of previous years 1 341 (222)Expenditure not allowable for income tax purposes 4 246 299Effect of differing tax rates between Canada, Australia and New Zealand 852 (988)Income tax (benefit) reported in the statement of operations (25 983) (11 341)
Future income taxFuture income tax at December 31 relates to the following:
Future income tax assets Losses available for offset against future taxable income 66 840 40 033Revaluations of hedge contracts to fair value 35 585 24 413Provisions 3 509 1 040Accrued expenses 4 1 154Share issue costs 2 734 249Other 677 1Gross future income tax assets 109 349 66 890Set-off future tax liabilities (73 098) (43 996)
36 251 22 894Less: current portion (33 595) (22 894)Net non- current future tax assets 2 656 -
Future income tax liabilitiesMining assets (105 275) (86 407)Property, plant and equipment (48 622) (41 307)Inventory (1 278) (868)Interest Receivable (449) (258)Accrued Revenue (2 024) (1 143)Revaluations of hedge contracts to fair value (1 554) (4 776)Other (146) -Gross future income tax liabilities (159 348) (134 759)Set-off future tax assets 73 098 43 996
(86 250) (90 763)Less: current portion - -Net non-current future tax liabilities (86 250) (90 763)
The consolidated entity has a benefit arising on recognised tax losses arising in New Zealand of $62.6m (2006: $39.2m) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose.
The recovery of carried forward tax losses is considered more likely than not of recovery based on forecast future taxable profits.
In the consolidated entity there are future tax liabilities at year end of $74m arising from the acquisition of assets as part of the Climax transaction during 2006.
52OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
7 Earnings per shareBasic earnings per share amounts are calculated by dividing net profit/(loss) for the year attributable to common equity holders of the parent by the weighted average number of common shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to common shareholders (after adding back interest on the convertible notes) by the weighted average number of common shares outstanding during the year (adjusted for the effects of dilutive options and dilutive convertible notes where the conversion of potential common shares would decrease earnings per share or increase loss per share).
The following reflects the income and share data used in the total operations basic and diluted earnings per share computations:
Numerator:Net (loss) attributable to equity holders from continuing operations (used in calculation of basic and diluted earnings per share)
(69 039)
(23 427)
Thousands ThousandsDenominator:Weighted average number of common shares (used in calculation of basic earnings per share) 146 777 81 191Effect of dilution:Share options* - -Convertible notes* - -
Adjusted weighted average number of common shares (used in calculation of diluted earnings per share) 146 777 81 191
* Conversion of share options and convertible notes would decrease the loss per share and hence are non-dilutive.
8 Accounts receivable and other receivablesCurrentTrade receivables 2 261 1 988Other receivables 862 262Accrued receivables 303 238
3 426 2 488
Non-CurrentOther - 26
- 26
Trade receivables are non-interest bearing and are due upon confirmation of gold assay. Other receivables include deposits at bank, in support of environmental bonds and deposits set out for rental of properties.
9 Disclosure of non-cash financing and investing activitiesThe acquisition of Climax in 2006 was a non-cash investing activity as consideration was in the form of an issue of securities. Please refer to note 22 for further detail.
There is capitalisation of non-cash share based compensation expense of $0.3m into mining assets as a non- cash investing activity.
10 InventoriesCurrentGold in circuit, at cost 3 677 1 584Gold on hand, at cost 2 828 -Ore, at cost 2 275 1 718Stores, at cost 12,157 7 196
20 937 10 498Non-CurrentOre, at net realisable value 23 953 21 452
Total inventories at lower of cost and net realisable value 44 890 31 950
53OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
For the years ended December 31, 2007 and 2006
11 Property, plant and equipment Freehold land, at costCost 4 904 4 501
Buildings, at costCost 5 089 4 605Accumulated depreciation (2 215) (1 804)Net of accumulated depreciation 2 873 2 801
Plant and equipment, at costCost 196 958 139 601Accumulated depreciation (58 735) (34 708)Net of accumulated depreciation 138 223 104 893
Assets under capital leaseCost 87 686 69 961Accumulated amortisation (37 366) (27 124)Net of accumulated amortisation 50 320 42 837
Net book value of property, plant and equipment 196 320 155 032
The capital lease liabilities are secured by the leased assets.
Borrowing costsThere are no borrowing costs capitalised into the cost of any assets held on the balance sheet at December 31, 2007 (2006: nil).
12 Mining assets Mining Assets: Exploration and evaluation phase, at costCost 319 993 263 149
Mining Assets: Development phase, at costCost 40 494 25 493
Mining Assets: In production, at costCost 112 691 45 745Accumulated amortisation (57 455) (18 049)Net of accumulated amortisation 55 236 27 696
Net book value of mining assets 415 723 316 338
The costs deferred in respect of exploration and evaluation expenditure are dependent upon successful development and commercial exploitation of the respective area of interest.
13 Asset retirement obligationCurrentRehabilitation 293 -
Movement:At January 1 - -Arising during the year 153 -Utilised 18 -Transferred from/(to) current 115 -Exchange adjustment 7 -At December 31 293 -
Non-CurrentRehabilitation 9 218 8,422
Movement:At January 1 8 422 6,704Arising during the year 485 1,491Acquired through acquisition - 188Utilised (203) (338)Transferred from/(to) current (115) -Exchange adjustment 629 377At December 31 9 218 8,422
54OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
RehabilitationA provision for rehabilitation is recorded in relation to the gold mining operations for the rehabilitation of the disturbed mining area to a state acceptable to various regulatory authorities. While rehabilitation is ongoing, final rehabilitation of the disturbed mining area is not expected until the cessation of mining, currently estimated to be beyond 2013.
Rehabilitation provisions are estimated based on survey data, external contracted rates and the timing of the current mining schedule. Provisions are discounted using a liability specific rate and are externally reviewed and approved by council nominated consultants.
Rehabilitation provisions are subject to an inherent amount of uncertainty in both timing and amount and as a result are continuously monitored and revised.
Asset retirement obligations are initially recorded as a liability at fair value, assuming a credit adjusted risk free discount rate of 6.5%. The liability for retirement and remediation on an undiscounted basis is estimated to be approximately $12.6 million.
14 Interest-bearing loans and borrowingsEffective Maturity Consolidated Consolidated
interest 2007 2006rate % $’000 $’000
For the years ended December 31, 2007 and 2006
CurrentCapital leases (note 24) 10.60% 5/31/2014 8 153 957Insurance Premium Loan (NZD) 10.55% 04/30/2008 575 -Project debt facility (NZD) 11.44% 12/31/2010 9 959 -
18 687 957
Non-currentCapital leases (note 24) 10.60% 05/31/2014 51 761 43,7985.75% Convertible Notes (A$55m) 9.16% 12/22/2012 44 846 39,3937.00% Convertible notes (A$70m) 10.13% 12/22/2013 57 255 46,8927.00% Convertible notes (A$30m) 10.64% 03/22/2014 23 599 -Project debt facility (NZD) 11.44% 12/31/2010 21 451 10,569
198 912 140,652
5.75% Convertible Notes (Unsecured)The Notes bear interest at 5.75% per annum payable semi-annually in arrears. The Notes mature at 109% of their principal amount in 2012 unless prior conversion to common shares at the option of the noteholder. The number of shares to be delivered upon conversion shall be determined by dividing the principal amount of the note by the conversion price of A$4.2435 (subject to adjustment for certain specified events).
7.00% Convertible Notes (Unsecured)The Notes bear interest at 7.00% per annum payable semi-annually in arrears. Interest accrued in respect of the notes for the first two years is not payable but is instead capitalised into the redemption value of the notes. The Notes mature in 2013 at a value equal to the sum of their principal amount plus the capitalised interest amount, unless prior conversion to common shares at the option of the noteholder. The number of shares to be delivered upon conversion shall be determined by dividing the principal amount of the note by the conversion price of A$4.0950 (Subject to adjustment for certain specified events).
On March 22, 2007 an additional A$30 million (US$24.2m) in convertible notes was issued under the same terms and conditions as the 7% convertible notes. The conversion price is A$4.3000 (subject to adjustment for certain specified events) and the notes mature in 2014. Of the A$28.8 million (US$23.2m) net proceeds of the issue A$24.9 million (US$20.1m) was allocated to interest bearing liabilities and A$3.9 million (US$3.1m) was allocated to equity.
Capital LeasesThe Group has two capital lease facilities in place, being a facility with ANZ Banking Group Ltd (“ANZ Facility”), and a Master Lease Facility with Caterpillar Finance (“CAT Master Lease”).
ANZ CAT Master
Original drawdown date December 28, 2006 October 5, 2006Term 5 years 7 years
Amount drawn down - NZ$ component
43 846 000
34 556 000
Interest rates - NZ$ component
10.41%
10.84%
Capital facilities availableAt 31 December 2007 the consolidated entity has issued A$143.6m (2006: A$109.3m) of convertible notes and has available capital lease facilities of NZ$ 83.5 million (2006: NZ$83.5m) of which NZ$78.4m (2006: NZ$63.5m) have been drawn.
A consortium of banks provides a 568 326 (2006: 694 806) ounce hedging facility to Oceana Gold New Zealand Ltd (OGNZL) (refer to Note 21). OGNZL’s assets are pledged as security.
Additionally, the consolidated entity has available a project debt facility of up to NZ$41 million provided by a consortium of banks of which NZ$41 million (2006: NZ$15m) has been drawn at December 31, 2007. OGNZL’s assets are pledged as security.
55OGC/AR/07
For the years ended December 31, 2007 and 2006
NotesConsolidated Consolidated
2007 2006Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
15 Shareholders’ equity(a) Authorised capitalThe number of authorised common shares of the company is unlimited
(b) Movement in common share capitalCommon sharesIssued and fully paid 334 975 246,146
Thousands $’000 Thousands $’000Movement in common shares on issueAt January 1 132 761 246 146 72 000 77,442Shares issued 28 774 94 392 16 41Share issue costs - (9 264) - -Tax effect of share issue costs - 3 158 - -Exercise of options 100 543 100 491Issued through acquisition of entity - - 60 645 168,172At December 31 161 635 334 975 132 761 246,146
Common shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Common shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
The company has a share option scheme under which options to subscribe for the company’s shares have been granted to executives. Details of options on issue are provided in Note 19. Shareholders have approved the issue of up to 10% of the Company’s issued and outstanding shares.
The Company also has an employee share purchase plan whereby employees are able to direct up to 10% of their gross salary to acquire shares, with the Company matching the employee contribution on a dollar for dollar basis. Plan shares are acquired at market price and held in trust. While the Trustee holds the shares, the employees are entitled to full dividend and voting rights on the shares beneficially held on their behalf. (Refer note 19).
As part of the share scheme for the Climax transaction there are also 30 321 702 listed options.
These options entitle the holder to subscribe for one OceanaGold share at an exercise price of A$4.625. The options can only be exercised during the period from January 1, 2008 to January 1, 2009 (or earlier in the event of a successful takeover bid for OceanaGold). The options lapse on January 1, 2009 if not exercised before that date.
OceanaGold’s listing on the Australian Stock Exchange (ASX) and the New Zealand Stock Exchange (NZX) was restructured in connection with the TSX listing. As a result of the restructure OceanaGold’s shares were consolidated using 1:5 per common share basis, which has been reflected in the above number of shares.
16 Accumulated other comprehensive income (“oci”)Consolidated Consolidated
2007 2006$’000 $’000
For the years ended December 31, 2007 and 2006
At January 1 Cash flow hedge gains (losses) (8 975) (10 358) Currency translation adjustments 12 050 4 881
3 075 (5 477)OCI for the year: Effective portion of change in fair value of gold put options (1 697) 2 487 Effective portion of change in fair value of gold forward contracts1 - (28 107) Transfers of cash flow hedge losses to earnings on recording hedged items in earnings 16 407 27 684 Currency translation differences 30 670 7 169OCI before tax 45 380 9 233 Income tax recovery/(expense) on effective portion of change in fair value of gold hedges 561 (821) Income tax recovery/(expense) on mark to market movement on gold forward contracts - 9 276 Income tax recovery/(expense) on transfers of cash flow hedge losses to earnings on recording hedged items in earnings
(5 414)
(9 136)
OCI net of tax 40 527 8 552
Accumulated OCI at December 31 Cash flow hedge gains (losses) 882 (8 975) Currency translation adjustments 42 720 12 050
43 602 3 075
The portion of hedge gain/(loss) expected to affect 2008 earnings based on the fair value of hedge contracts at December 31, 2007 is $0.9m.
1 On May 16, 2006, the Group restructured its gold hedge contracts. The fair value of the gold hedge contracts at May 16, 2006 was recognised in Accumulated Other Comprehensive Income and has unwound to earnings in the period to June 2007 (refer to Note 21).
56OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
17 Contributed surplusMovement in contributed surplusAt January 1 28 171 3 284Stock-based compensation expense 1 884 293Cancelled options (519) -Issue of options - 18 101Exercise of options (230) (212)Issue of convertible notes - value of conversion rights 3 073 6 705
32 379 28 171
18 Segment informationThe Group’s operations are managed on a regional basis. The two reportable segments are New Zealand and the Philippines.
New Zealand Philippines Total$’000 $’000 $’000
For the years ended December 31, 2007 and 2006
Year Ended December 31, 2007RevenueSales to external customers 104 395 - 104 395Release from other comprehensive income of deferred unrealised losses on designated hedges
(16 407)
-
(16 407)
Total Segment Revenue 87 988 - 87 988
ResultSegment result excluding unrealised hedge losses (9 608) (501) (10 109)Release from other comprehensive income of deferred unrealised losses on designated hedges
(16 407)
-
(16 407)
(Loss) on fair value of undesignated hedges (45 847) - (45 847)Total Segment result (71 862) (501) (72 363)Unallocated expenses (3 245)(Loss) before tax and finance costs (75 608)Interest expense (19 414)(Loss) before tax (95 022)Income tax benefit 25 983Net (loss) for the year (69 039)
AssetsSegment assets 395 862 314 334 710 196Unallocated assets 112 377 Total assets 395 862 314 334 822 573
Year Ended December 31, 2006RevenueSales to external customers 94 750 - 94 750Release from other comprehensive income of deferred unrealised losses on designated hedges
(27 684)
-
(27 684)
Total Segment Revenue 67 066 - 67 066
ResultSegment result excluding unrealised hedge losses (1 894) (463) (2 357)Release from other comprehensive income of deferred unrealised losses on designated hedges
(27 684)
-
(27 684)
Gain / (loss) on fair value of undesignated hedges - - -Total Segment result (29 578) (463) (30 041)Unallocated expenses 1 867(Loss) before tax and finance costs (28 174)Interest expense (6 594)(Loss) before tax (34 768)Income tax benefit 11 341Net (loss) for the year (23 427)
AssetsSegment assets 348 482 258 643 607 125Unallocated assets 16 604 Total assets 348 482 258 643 623 729
Income derived in the New Zealand segment is from the sale of gold. There are no inter-segment transactions.
57OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
19 Stock-based compensation(a) Executive share options planDirectors, executives and certain members of staff of the consolidated entity hold options over the common shares of the Company, OceanaGold Corporation. Each option entitles the holder to one common share upon exercise. The options were issued for nil consideration and have a maximum term of five years. Granted options vest in three equal tranches over 3 years and vesting is subject only to continuity of employment.
The vested options are only exercisable if the relevant vesting conditions are met and the relevant employee or executive is employed by or on behalf of the consolidated entity, or its associates, at the time the options are exercised or if the options are exercised within 30 days of the relevant employee or executive ceasing such employment.
The options cannot be transferred without the Company’s prior approval and the Company does not intend to list the options. No options provide dividend or voting rights to the holders. Under the 2007 stock based compensation plan approved by OceanaGold shareholders the company can issue up to 10% of issued common and outstanding shares.
(i) Stock Option movementsThe following table reconciles the outstanding share options granted under the executive share option scheme at the beginning and the end of the period:
WAEP = weighted average exercise price
December 31, 2007 December 31, 2006 No. WAEP No. WAEP
Outstanding at the start of the period 1 300 000 A$5.35 1 555 000 A$5.40Granted in the money 1 930 000 A$3.47 - -Granted out of the money 1 460 000 A$4.07 85 000 A$5.45Forfeited (1 050 000) A$4.14 (240 000) A$6.50Exercised (100 000) A$3.75 (100 000) A$3.75Cancelled (940 000) A$5.27 - -Balance at the end of the period 2 600 000 A$3.81 1 300 000 A$5.35Exercisable at the end of the period - - 100 000 $3.75
OceanaGold’s listing on the Australian Stock Exchange (ASX) and the New Zealand Stock Exchange (NZX) was restructured in connection with the TSX listing. As a result of the restructure OceanaGold’s shares were consolidated using 1:5 per common share basis, which has been reflected in the above number of shares.
In June 2007 OceanaGold cancelled the remaining options of the 2004 executive share compensation plan. In consideration for the cancellation of options each option holder received a cash payment of A$0.05 per option. The total value of all consideration paid was A$0.05m.
(ii) Balance at end of the periodThe share options at the end of the financial period had an exercise price of between A$3.40 and A$4.26 and a weighted average remaining contractual life of 4.23 years. The share options were restructured on a 1:5 basis for the TSX listing.
The weighted average fair value of the share options granted during the financial year is A$1.73 (2006 Nil) for those granted in the money and A$1.79 (2006 A$1.73) for those granted out of the money. Options were priced using a binomial option pricing model. Where options had a performance hurdle a Monte-Carlo simulation was used to value the performance hurdle. Where options do not have a performance hurdle they were valued as Bermudan style options using the Cox Rubenstein Binomial model.
The expected life used in the model has been based on the assumption that employees remain with the company for the duration of the exercise period and exercise the options when financially optimal. This is not necessarily indicative of exercise patterns that may occur.
Due to the lack of exchange traded data for option prices of OceanaGold and many other companies, historical volatility has been used for the purposes of the valuation. Expected volatility is based on the historical share price volatility using 3 years of traded share price data. As a result it reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the outcome.
Dividend yield is assumed to be nil on the basis that no dividends have been declared for the 2006 or 2007 financial years due to the large ongoing capital commitment.
The following table gives the assumptions made in determining the fair value of options granted in the financial year:
Grant Date
Dividend yield
Expected volatility
Risk-free interest
rate
Expected life of
option
Option Exercise
Price
Share Price at Grant
Date
Weighted Average
Fair Value
19 Jan 2007 0% 43.0% 6.086% 5.0 years A$3.49 A$3.575 A$1.68519 Jan 2007 0% 43.0% 6.086% 5.0 years A$3.40 A$3.575 A$1.71519 Jan 2007 0% 43.0% 6.086% 5.0 years A$3.60 A$3.575 A$1.6519 Jan 2007 0% 43.0% 6.086% 5.0 years A$3.44 A$3.575 A$1.7051 Mar 2007 0% 43.0% 5.86% 5.0 years A$3.79 A$3.60 A$1.6012 Mar 2007 0% 43.0% 5.898% 5.0 years A$3.63 A$3.75 A$1.7719 Mar 2007 0% 43.0% 6.028% 5.0 years A$3.62 A$3.575 A$1.64516 Apr 2007 0% 42.0% 5.75% 5.0 years A$3.75 A$3.825 A$1.7819 Apr 2007 0% 42.0% 5.75% 5.0 years A$3.77 A$3.75 A$1.71523 Apr 2007 0% 42.0% 5.75% 5.0 years A$3.83 A$4.00 A$1.8930 Apr 2007 0% 42.0% 5.75% 5.0 years A$3.97 A$4.225 $2.01524 May 2007 0% 42.0% 5.75% 5.0 years A$4.26 A$4.125 A$1.85
For the years ended December 31, 2007 and 2006
58OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
(b) Employee share acquisition planUnder the OceanaGold Corporation Employee Share Acquisition Plan (the “Plan”), the Company offers all employees of the consolidated entity (other than directors of the Company) the opportunity to purchase shares in OceanaGold. Eligible employees are able to direct up to 10% of their gross salary to acquire shares, with the Company matching the employee contribution on a dollar for dollar basis.
Plan shares are acquired at market price and held in trust for the participating employees by a dedicated corporate trustee. While the Trustee holds the shares, the employees are entitled to full dividend and voting rights on the shares beneficially held on their behalf. A comprehensive Plan Constitution and Trust Deed set out the basis of operation of the Plan, pursuant to relevant Corporations Act and taxation legislation requirements.
The transfer or sale of Plan shares is restricted for a maximum of 3 years. On each anniversary of an employee’s commencement with the Plan, one third of Plan shares acquired in the prior 3-year period are vested to the employee.
Details of the employee share plan for the consolidated entity are as follows:
Opening Shares Held by Trustee
Shares Acquired by the Trustee
During the Year
Shares Transferred from the Trustee During the Year
Forfeited Shares sold by Trustee
Closing Shares Held by the
Trustee Number Number 1 Fair Value 2 Number 3 Fair Value 4 Number 3 Number Fair Value 5
2006 79 553 67 882 A$256 430 24 926 A$97 956 - 122 509 A$459 409
2007 122 509 54 243 A$188 003 41 774 A$153 559 - 134 978 A$375 239
Notes:1. The Trustee acquires shares regularly throughout the year, following receipt of contributions from employees and the consolidated entity.
2. The fair value of shares acquired by the Trustee is equal to the market price paid by the Trustee for acquisitions of OceanaGold Corporation shares throughout the year. The fair value comprises 50% contribution from employees and 50% contribution from the Company.
3. Members of the Plan are entitled to hold their vested shares in the Trustee for up to 10 years following vesting. The Trustee distributes vested shares to members following receipt of a request to do so, and accordingly these transfers can take place throughout the year on a regular basis. Additionally, members who cease employment with the consolidated entity are entitled to receive their employee funded Plan shares without having to wait for the vesting period. In the event of a member ceasing employment, the Company funded Plan shares that have not reached vesting stage are forfeited to the Trust.
4. The fair value of the shares transferred out by the Trustee during the year is represented by the market value of the OceanaGold Corporation shares at the time of transfer.
5. The fair value of the shares held by the Trustee at reporting date has been determined by reference to the last sale price of OceanaGold Corporation shares at reporting date.
20 Employee benefits(a) Employee benefit liability
Consolidated Consolidated2007 2006
$’000 $’000
For the years ended December 31, 2007 and 2006
Aggregate employee benefit liability is comprised of:
Accrued wages and salaries 331 205Provisions current 2 291 1 550Provisions non-current - 81
2 622 1 836
(b) Defined Contribution Plans The Group has defined contribution pension plans for certain groups of employees. The Group’s share of contributions to these plans is expensed in the year it is earned by the employee.
The defined contribution plan expense was $0.1m (2006: $0.05m).
59OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
21 Financial instruments(a) Financial Risk Management Policies and ObjectivesFinancial exposures arise in the normal course of the consolidated entity’s business operations, including commodity price risk, foreign exchange risk and liquidity risk as well as credit risk associated with trade and financial counterparties. The policy for managing each of these risks is reviewed and agreed by the Board, and are summarised below.
The consolidated entity has a risk management programme to manage its financial exposures that includes, but is not limited to, the use of derivative products within three banking institutions. The term “derivative” has been adopted to encompass all financial instruments that are not directly traded in the primary physical market. The Group does not enter into trade financial instruments, including derivative financial instruments for trade or speculative purposes.
The consolidated entity faces operational risk associated with the financial transactions conducted but seeks to manage this risk by having established operating policies and procedures. These policies and procedures are set by the Board.
(b) Gold Price and Foreign Exchange RiskOGNZL has a hedging facility for 568 326 (2006: 694 806) ounces at December 31, 2007. The security for this facility consists of:
(i) share mortgages over OceanaGold Limited’s interests in OGNZL;(ii) a general security deed creating a security interest over all the present and future property of OGNZL;(iii) first registered fixed and floating charges over all OGNZL assets and undertakings and registered mortgages over the relevant mining tenements and material
land; and(iv) interests in forward sales contracts held by a subsidiary of the company (refer below), supported by a guarantee by OceanaGold Limited of the obligations of
OGNZL.
Prices for the consolidated entity’s primary commodity products (gold bullion) are determined on international markets and quoted in US dollars.
Metal prices and exchange rates are fixed using forward sale contracts and options. Derivative financial instruments are matched with future metal production or revenues denominated in US dollars.
The forward sales programme is managed in accordance with policies approved by the Board. Performance under these policies is regularly reported to the Board.
The following summarises the gold forward obligations at December 31, 2007:
Total Dec 31 2007
Maturity 2008
Maturity 2009
Maturity 2010
Gold fixed forward salesOunces 319 788 113 712 106 236 99 840Weighted average NZ$/oz 773.01 773.01 773.01 773.01Present value NZ$/oz 689.61 739.51 686.97 635.59
The net return if all the bullion forward contracts guaranteed by the consolidated entity were to be delivered as compared to the market value of these obligations at December 31, 2007 was $97.724m deficit (2006: $63.374m deficit,). None of the forward contracts are considered to be specific hedges of the future gold production of the Group and consequently movements in their fair value or mark to market position since the restructure have been reflected in the statement of operations.
During 2006 a subsidiary of the company also entered into a series of put option contracts to sell 320,769 ounces of gold at an average minimum price of NZ$1,000 per ounce between 2007 and 2010. At the same time a series of call options were sold whereby the Group is obliged to sell 104,024 ounces of gold at an average maximum price of NZ$1,062 in 2010 if called upon to do so by the counter party to the contracts.
The following summarises the gold option contracts at December 31, 2007:
Total Dec 31 2007
Maturity 2008
Maturity 2009
Maturity 2010
Metal Commitments
Gold Put optionsOunces 248 538 81 042 85 416 82 080Weighted average NZ$/oz 1 000.33 1 000.33 1 000.33 1 000.33Present value NZ$/oz 1 115.71 1 105.96 1 118.59 1 122.33Gold Call OptionsOunces 104 024 104 024Weighted average NZ$/oz 1 062.3 1 062.3Present value NZ$/oz 826.32 826.32
The net return if all the bullion option contracts guaranteed by the consolidated entity were to be delivered as compared to the market value of these obligations at December 31, 2007 was $15.7m deficit (2006: 4.1m surplus). The put option contracts were considered specific hedges pre 1 April 2007, currently none of the option contracts are considered to be specific hedges of future gold production and consequently movement in their fair value or Mark to Market position have been reflected in the statement of operations.
The consolidated entity had in place forward currency contracts to protect certain specific payment commitments. The net surplus value of foreign exchange hedge contract, compared to the spot prices prevailing at December 31, 2007, was $nil (2006: $0.282m).
For the years ended December 31, 2007 and 2006
60OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
A summary of the Group’s derivatives is set out below:
Current AssetsGold put options 5 181 4 298Non Current AssetsGold put options - 10 170Current LiabilitiesGold forward sales contracts 97 724 63 374Gold call options 20 894 10 322Forward currency contracts - 282
118 618 73 978
Net liabilities 113 437 59 510
The net loss recognised in the statement of operations relating to the amount of gains and losses reclassified to net income as a result of the discontinuance of cash flow hedges because it is probable that the original anticipated transactions will not occur by the end of the originally specified time period is Nil (2006 $0.9m).
(c) Interest Rate RiskObjectiveThe consolidated entity’s approach to managing the risk of adverse changes in interest rates is to manage the identified net exposure through variable and fixed rate arrangements or financial derivatives.
PolicyThe consolidated entity policy is to manage interest rate risk in a cost efficient manner having regard to the net interest rate exposure after offsetting interest bearing financial assets with interest accruing financial liabilities.
The consolidated entity’s exposure to interest rate risk, and the effective weighted average interest rate for classes of financial assets and financial liabilities, both recognised and unrecognised at the reporting date, is set out below:
Less than 1 year
1-2 years
2-3 years
3-4 years
4-5 years
5 + years
Total
Weighted average effective interest rate
$’000 $’000 $’000 $’000 $’000 $’000 $’000 %
Year ended December 31, 2007Fixed rateFinancial LiabilitiesInsurance loan 575 - - - - - 575 10.55%Convertible Notes - - - - - 125 700 125 700 9.88%
575 - - - - 125 700 126 275Floating rateFinancial AssetsCash and cash equivalents 119 837 - - - - - 119 837 5.51%
119 837 - - - - - 119 837Financial LiabilitiesProject Debt facility 9 959 9 193 12 258 - - - 31 410 11.44%Capital Leases 8 152 9 123 9 915 20 208 3 454 9 062 59 914 10.60%
18 111 18 316 22 173 20 208 3 454 9 062 91 324
Year ended December 31, 2006Fixed rateFinancial AssetsShort-term Deposits 8 595 - - - - - 8 595 6.33%
8 595 - - - - - 8 595Financial LiabilitiesProject Debt facility - 10 569 - - - - 10 569 10.25%Convertible Notes - - - - - 86 285 86 285 9.68%
- 10 569 - - - 86 285 96 854Floating rateFinancial AssetsCash and cash equivalents 71 430 - - - - - 71 430 5.55%
71 430 - - - - - 71 430Financial LiabilitiesCapital Leases 957 6 232 6 888 7 620 17 155 5 903 44 755 9.44%
957 6 232 6 888 7 620 17 155 5 903 44 755
61OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
(d) Credit RiskThe consolidated entity’s operations and its access to commodity and currency forward sales transactions create credit risk.
The consolidated entity has in place policies for the management of credit exposures, which include Board approval of all counterparties. The policies establish limits and methodology for measuring and reporting credit exposures to financial counterparties.
Maximum credit risk of financial assets is the carrying amounts recorded in the balance sheet.
The consolidated entity is not materially exposed to any individual customer or other third party.
Financial instruments that potentially subject the consolidated entity to concentrations of credit risk consist principally of cash deposits and hedge assets. The consolidated entity places its cash deposits and hedge assets with high credit-quality financial institutions and limits the amount of credit exposure to any one financial institution. The cash deposits all mature within three months and attract a rate of interest at normal short-term money market rates.
(e) Liquidity RiskObjectiveThe consolidated entity’s approach to managing liquidity risk is to ensure cost effective continuity in funding and trading liquidity. Funding liquidity is maintained through the use of bank project loans, convertible bonds, capital leases and operating leases. Trading liquidity is maintained by an effective spread between the counterparties with which the consolidated entity enters into derivative instruments.
Policy The consolidated entity’s funding liquidity risk policy is to source debt or equity funding appropriate to the use of funds. Examples include equipment leases to finance the mining fleet and the convertible note issue to finance the development of new mines. Trading risk policy is to ensure derivative transactions are spread between at least two secured counterparties acknowledging both volume and tenure of the derivative to reduce the risk of trading liquidity arising as a result of the inability to close down existing derivative positions, or hedge underlying risks incurred in normal operations.
22 Acquisition of assetsOn November 6, 2006 OceanaGold completed an acquisition of Climax by way of a scheme of arrangement. Upon completion of the acquisition OceanaGold acquired 100% of the voting shares of Climax Mining Ltd, a listed public company based in Australia engaged in minerals exploration, pre-development of the Didipio Gold-Copper Project and investment.
The total cost of the asset acquisition was $187,098,167 and comprised of the issue of equity instruments and the payment of costs directly attributable to the asset acquisition. The Group issued 60 644 379 common shares with a fair value of A$3.60 cents each, based on the quoted price of OceanaGold on the date of exchange, and issued 30 321 702 options to acquire shares in OceanaGold, with a fair value of A$0.775 each, determined by use of a Binomial option valuation methodology.
The fair value of the identifiable assets and liabilities of Climax as at the date of acquisition were:
Recognised on acquisition
Plant and equipment 384 Mining assets 248 723Cash and cash equivalents 8 368 Trade receivables 182 Prepayments 92 Other receivables 157
257 906Trade payables 878 Other payables 1 304 Provision for Employee entitlements 532 Provision for rehabilitation 193 Future tax liability 65 144Other non current liabilities 2 757 Fair value of identifiable net assets 187 098
Cost of combination:Shares issued, at fair value 168 172 Options issued, at fair value 18 101 Direct costs relating to the acquisition 825 Total cost of the combination 187 098
The cash inflow on acquisition as follows:Net cash acquired with the subsidiary 8 368Cash paid (807) Net consolidated cash inflow 7 561
For the years ended December 31, 2007 and 2006
62OGC/AR/07
Notes to consolidated financial statement
For the years ended December 31, 2007 and 2006
Notes
23 Fair value of financial instruments(a) Recognised Financial InstrumentsThe carrying amounts and net fair values of financial assets and liabilities as at the reporting date are as follows:
Carrying amount Net Fair value2007 2006 2007 2006
$’000 $’000 $’000 $’000
Financial assetsCash 119 837 80 025 119 837 80 025Accounts receivable and other receivables 3 426 2 488 3 431 2 488Put options 5 181 14 468 5 181 14 468Other financial assets - - - -
Financial liabilitiesTrade payables 34 139 18 167 34 139 18 167Capital leases 59 914 44 755 51 270 44 755Forward gold contracts 97 724 63 374 97 724 63 374Convertible notes 125 700 86 285 120 755 85 697Call options and foreign exchange contracts 20 894 10 322 20 894 10 322Project debt facility 31 410 10 569 29 726 10 569Insurance premium loan 575 - 575 -
Cash, Accounts receivable and Trade payables have the same carrying amount as fair value due to being short term maturities.
Other than cash and forward gold contracts, none of the other financial assets and liabilities are readily traded on organised markets in a standardised form.
The fair value of forward gold instruments has been calculated by discounting the future value of the forward contract at the appropriate prevailing quoted market rates at reporting date.
The fair value of capital leases is the present value of the minimum lease payments determined using an appropriate market discount rate.
The fair value of convertible notes is the present value of the debt component using an appropriate market interest rate for equivalent debt.
(b) Unrecognised Financial InstrumentsThere are no unrecognised financial instruments held by the Group at December 31, 2007 (2006: nil).
24 Commitments(a) Lease commitments under non-cancellable operating leases:
2007 $’000
Within 1 year 3 278Within 1 to 2 years 247Within 2 to 3 years 69Within 3 to 4 years -Within 4 to 5 years -More than five years -
3 594
Operating leases are entered into as a means of funding the acquisition of minor items of plant and equipment. No leases have escalation clauses other than in the event of payment default. No lease arrangements create restrictions on other financing transactions.
(b) Lease commitments under capital leases:
2007 $’000
2006 $’000
Within 1 year 11 331 4 750Within 1 to 2 years 11 787 10 211Within 2 to 3 years 12 085 10 233Within 3 to 4 years 21 863 10 253Within 4 to 5 years 4 571 21 045More than five years 9 861 4 421
71 498 60 913
Future finance charges (11 584) (16 158)
Present value of minimum lease payments 59 914 44 755
Reconciled to:Current interest bearing liability (Note 14) 8 153 957Non-Current interest bearing liability (Note 14) 51 761 43 798Total 59 914 44 755
Capital leases are entered into as a means of funding the acquisition of plant and equipment, primarily mobile mining equipment. Rental payments are subject to quarterly interest rate adjustments.
63OGC/AR/07
Consolidated Consolidated2007 2006
Notes to consolidated financial statement $’000 $’000
For the years ended December 31, 2007 and 2006
Notes
For the years ended December 31, 2007 and 2006
(c) Gold ProductionThe consolidated entity has certain obligations to deliver future gold production into bullion forward sales contracts. Refer to Note 21(b).
The consolidated entity also has certain obligations to royalties on gold production at prescribed levels which are expected to apply in 2008.
(d) Capital commitmentsAt December 31, 2007, the consolidated entity has commitments of $32.7m (2006: $30.9m), principally relating to the completion of operating facilities.
The commitments contracted for at reporting date, but not provided for:
Within one year:- development of new mining facilities 29 746 25 287After one year but not more than five years:- development of new mining facilities 2 951 5 667Longer than five years - -
32 697 30 954
(e) The consolidated entity is committed to annual expenditure of approximately $0.4m (NZ$0.5m) (2006 $0.3m or NZ$0.5m) to comply with regulatory conditions attached to its New Zealand prospecting licences and prospecting, exploration and mining permits
25 Contingenciesa. The consolidated entity has issued bonds in favour of various New Zealand authorities (Ministry of Economic Development – Crown Minerals, Otago Regional
Council, Waitaki District Council, West Coast Regional Council, Buller District Council, Timberlands West Coast Limited and Department of Conservation) as a condition for the grant of mining and exploration privileges, water rights and/or resource consents, and rights of access for the Macraes Gold Mine and the Globe Progress mine at the Reefton Gold Project which amount to approximately $13.9 m (NZ$18.2 m) (2006 $15.9m NZ$21.3m).
b. The consolidated entity has provided a cash operating bond to the New Zealand Department of Conservation of $0.3 m (NZ$0.4 m) (2006 $0.3m NZ$0.4m) which is refundable at the end of the Globe Progress mine. This amount is included in the total referred to in (a) above.
c. In the course of normal operations the consolidated entity may receive from time to time claims and suits for damages including workers compensation claims, motor vehicle accidents or other items of similar nature. The consolidated entity maintains specific insurance policies to transfer the risk of such claims. No provision is included in the accounts unless the Directors believe that a liability has been crystallised. In those circumstances where such claims are of material effect, have merit and are not covered by insurance, their financial effect is provided for within the financial statements.
d. The Group has provided a guarantee in respect of a capital lease agreement for certain mobile mining equipment entered into by a controlled entity. At December 31, 2007 the outstanding rental obligations under the capital lease are $59.9 m (2006 $44.8 m). Refer to Note 24 (b). Associated with this guarantee are certain financial compliance undertakings by the Group, including gearing covenants.
e. A third party has a contractual right to an 8% free carried interest in the operating vehicle that will be formed to undertake the management, development, mining and processing of ore, and marketing of products as part of the Didipio project. This free carried interest is a right to 8% of the common share capital of the operating vehicle. At December 31, 2007 no such equity has been issued to the third party as the conditions precedent to such an issue have not yet been satisfied. No provision has been included in the accounts as no liability has been crystallized and the fair value of the contingent liability is unable to be measured reliably as there is inherent uncertainty about the operating vehicles’ future dividend distribution policy after development expenditure has been recovered
f. The Didipio Project is held under a Financial of Technical Assistance Agreement (“FTAA”) granted by the Philippines Government in 1994. The FTAA grants title, exploration and mining rights with a fixed fiscal regime. Under the terms of the FTAA, after a period in which the company can recover development expenditure, capped at 5 years from the start of production, the Company is required to pay the Government of the Republic of the Philippines 60% of the “net revenue” earned from the Didipio Project. For the purposes of the FTAA, “net revenue” is generally the net revenues derived from mining operations, less deductions for, among other things, expenses relating to mining, processing, marketing, depreciation and certain specified overhead. In addition, all taxes paid to the Government shall be included as part of the 60% payable to the Government. The FTAA also contains a provision requiring the Company to divest 60% of its interest in the project (or such lesser percentage as may be imposed by law) to Filipino persons by the later of ten years after the recovery of pre-operating expenses or 20 years after the FTAA, in which case the revenue sharing arrangement described above will cease to apply; provided that as an alternative to divestment the Company may, at its option, enter into a mineral production sharing agreement with the Government.
26 Related party disclosureThe following table provides the total amount of transactions which have been entered into with related parties for the relevant financial year:
Sales to related parties
Purchases from related parties
Amounts owed by related parties
Amounts owed to related parties
$’000 $’000 $’000 $’000
Related party- GRD Limited (i) 2007 - - -
2006 - 50 - -- Minproc (ii) 2007 - - -Engineering consulting services & construction 2006 - 1 021 - -- Churchill Capital (iv)Gold handling fees 2007 - -Gold handling fees 2006 - 139 - -
(i) GRD Limited was a shareholder and related entity until May 18, 2006 when GRD sold their remaining share in OceanaGold.(ii) Minproc, a director-related entity, provide engineering, consulting and construction services to the consolidated entity.(iii) Churchill Capital, a director-related entity performed gold handling services as the consolidated entity’s gold agent.
Sales to and purchases from related parties have been recognised at the exchange amount.
Outstanding balances at year-end are unsecured and settlement occurs in cash.
27 Events after the balance sheet dateOceanaGold Corporation has successfully commissioned Frasers Underground mine at the Macraes operation in the South Island of New Zealand.
Registrar
Shareholder Information(a) Number of holders of equity securities
Ordinary share capital
161,634,849 fully paid ordinary shares are held by
6,610 individual shareholders.
30,321,702 options are held by 1,908 individual
option holders
Voting rights of members are governed by the Company’s
Constitution. In summary, on a show of hands, every member
present in person or by proxy shall have one vote and upon
a poll every such attending member shall be entitled to one
vote for every share held. All fully paid ordinary shares
issued by the Company carry one vote per share.
(b) Distribution of shareholdingsFully paid ordinary shares
HoldingNumber of
HoldersNumber of
Shares
1 - 1,000 3,261 1,500,8051,001 - 5,000 2,524 5,825,4355,001 - 10,000 448 3,319,35610,001 - 100,000 324 8,722,263100,001 and over 53 142,266,990Total number of holders 6,610 161,634,849Number of shareholders holding less than a marketable parcel (of 169 shares)
667
(c) Substantial Shareholders
The Company’s Substantial Shareholders and the number of
equity securities in which they have an interest as disclosed
by notices received under section 671B of the Corporations
Act 2001 as at 10 March 2008 are:
Name
Fully Paid Ordinary
Shares
CDS & Co 32,107,856ANZ Nominees Limited (Cash Income A/C) 26,915,986HSBC Custody Nominees (Australia) Limited – A/C 2 18,614,910HSBC Custody Nominees (Australia) Limited 9,485,927HSBC Custody Nominees (Australia) Limited – GSI ECSA 8,708,184National Nominees Limited 8,434,918
(d) Top Twenty Shareholders
The names of the 20 largest holders of each class of security
as at 10 March 2008 are listed below:
Fully Paid Ordinary Shares
Rank Name Number %
1 CDS & Co 32,107,856 19.86
2ANZ Nominees Limited (Cash Income A/C)
26,915,986 16.65
3HSBC Custody Nominees (Australia) Limited – A/C 2
18,614,910 11.51
4HSBC Custody Nominees (Australia) Limited
9,485,927 5.86
5HSBC Custody Nominees (Australia) Limited – GSI ECSA
8,708,184 5.38
6 National Nominees Limited 8,434,918 5.217 Citicorp Nominees Pty Limited 7,206,779 4.458 JP Morgan Nominees Australia 6,620,741 4.09
9Citicorp Nominees Pty Limited (CFS W/SALE GBL RES FUND A/C)
4,852,042 3.00
10 CS Fourth Nominees Pty Ltd 2,874,908 1.7711 HESTIAN Pty Ltd 1,678,710 1.03
12TEMPIO Group of Companies Limited
1,636,800 1.01
13 Den Duyts Corporation Pty Ltd 1,542,855 0.9514 Yandal Investments Pty Limited 1,200,000 0.7415 LIPPO Securities Nominees (BVI) Ltd 1,164,516 0.72
16HSBC Custody Nominees (Australia) Limited – A/C 3
1,089,870 0.67
17HSBC Custody Nominees (Australia) Limited – GSCO ECA
786,178 0.48
18 Goldman Sachs & Co FBO 711,866 0.4419 Dr Peter Malcolm Heyworth 510,300 0.31
20Merrill Lynch (Australia) Nominees Pty Limited
489,531 0.30
136,632,897 84.53
64OGC/AR/07
GlossaryA ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain quality and reliability.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.
A ‘Mineral Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves.
A ‘Probable Mineral Reserve’ is the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
A ‘Proven Mineral Reserve’ is the economically mineable part of a Measured Mineral Resource. It includes diluting materials and allowances for losses which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified.
Cautionary Statements Regarding Forward-Looking Information This Annual Report contains “forward-looking information” within the meaning of applicable securities laws which may include, but is not limited to, statements with respect to the future financial and operating performance of the company, its subsidiaries and affiliated companies, its mining projects, the future price of gold, the estimation of mineral reserves and mineral resources, the realization of mineral reserve and resource estimates, costs of production, estimates of initial capital, sustaining capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of the development of new mines, costs and timing of future exploration, requirements for additional capital, governmental regulation of mining operations and exploration operations, timing and receipt of approvals, consents and permits under applicable mineral legislation, environmental risks, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “targets”, “aims”, “anticipates” or “believes” or variations (including negative variations) of such words and phrases, or may be identified by statements to the effect that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company and/or its subsidiaries and/or its affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, future prices of gold; general business, economic, competitive, political and social uncertainties; the actual results of current production, development and/or exploration activities; conclusions of economic evaluations and studies; fluctuations in the value of the United States dollar relative to the Canadian dollar, the Australian dollar or the New Zealand dollar; changes in project parameters as plans continue to be refined; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability or insurrection or war; labour force availability and turnover; delays in obtaining financing or governmental approvals or in the completion of development or construction activities or in the commencement of operations; as well as those factors discussed in the section entitled “Risk Factors” in the company’s Annual Information Form in respect of its year ending December 31, 2007 filed with Canadian securities regulatory authorities. Although the company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this Annual Report and, subject to applicable securities laws, the company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.
Shareholder Information continued
(e) Top Twenty Listed Option holders
The names of the 20 largest holders of listed options as at
10 March 2008 are listed below:
Fully Paid Ordinary Shares
Rank Name Number %
1ANZ Nominees Limited (Cash Income A/C)
4,184,468 13.80
2 JP Morgan Nominees Australia 4,018,228 13.25
3HSBC Custody Nominees (Australia) Limited – GSI ECSA
1,913,302 6.31
4 Citicorp Nominees Pty Limited 1,723,219 5.68
5HSBC Custody Nominees (Australia) Limited – A/C 3
1,466,740 4.84
6 National Nominees Limited 1,346,931 4.44
7HSBC Custody Nominees (Australia) Limited
1,336,061 4.41
8 Citicorp Nominees Pty Limited 1,174,840 3.879 LIPPO Securities Nominees (BVI) Ltd 1,082,809 3.5710 HESTIAN Pty Ltd 839,355 2.77
11TEMPIO Group of Companies Limited
818,400 2.70
12 C/- SUITE 701 7th Floor 771,427 2.5413 Den Duyts Corporation Pty Ltd 693,372 2.29
14ANZ Nominees Limited (SL Cash Income 4SF A/C)
677,827 2.24
15HSBC Custody Nominees (Australia) Limited – A/C 2
399,604 1.32
16 Ms Lorraine Beryl Johnson 326,970 1.0817 MINJELA Pty Ltd 300,000 0.99
18HSBC Custody Nominees (Australia) Limited – GSCO ECA
252,769 0.83
19 Mr Robert Peter Thomson 247,360 0.82
20Merrill Lynch (Australia) Nominees Pty Limited
233,944 0.77
23,807,626 78.52
Designed by Value Added Design, Australia Printed by John Herrod and Associates, Australia
ProfileOceanaGold Corporation (OceanaGold) is a significant
Pacific Rim Gold producer, with assets on the South Island of
New Zealand and in the Philippines.
To date, OceanaGold has been best known for operating
New Zealand’s largest gold mine – Macraes. However, in the
last two years the company has commissioned an additional
two new mines in New Zealand, and the future looks even
brighter. In 2009 OceanaGold’s fourth mine, the Didipio Gold
Copper Project will commission, increasing production to
approximately 500,000 gold equivalent ounces per annum,
and will firmly entrench the company as one of the premier
gold growth stories out of the Pacific Rim.
OceanaGold is listed on the Toronto, Australian and New
Zealand stock exchanges under the stock code OGC.
OceanaGold Corporation Corporate Office Level 5, 250 Collins Street
Melbourne, Victoria, 3000 Australia
PO Box 355, Flinders Lane PO
Melbourne, Victoria, 3000 Australia
T: +61 3 9656 5300
F: +61 3 9656 5333
www.oceanagold.com
OceanaGold Corporation Annual Report 2007
www.oceanagold.com
OceanaG
old C
orporation A
nnual Rep
ort 2007
Delivering on sustainable growth
OceanaGold Corporation
Directors
James E Askew (Chairman)
T Kerry McDonald
Terrence N Fern
Jose P Leviste Jr.
J Denham Shale
Stephen A Orr
Company Secretary
Matthew Salthouse
Registered Office
Fasken Martineau DuMoulin LLP
2900 – 550 Burrard Street
Vancouver, British Columbia V6C OA3
Canada
Share Registries
Canada
Computershare Investor Services
3rd Floor, 510 Burrard Street
Vancouver, British Columbia V6C 3B9
Canada
T: +1 604 661 9400
F: +1 604 661 9549
Australia
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford, Victoria 3067, Australia
T: +61 3 9415 4000
F: +61 3 9473 2500
New Zealand
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 1309, New Zealand
T: +64 9 488 8700
F: +64 9 488 8787
Auditors
Ernst & Young
Chartered Accountants
8 Exhibition Street
Melbourne, Victoria 3000, Australia
T: +61 3 9288 8000
Stock Exchanges
Canada
Toronto Stock Exchange
3rd Floor, 130 King Street W.
Toronto, Ontario M5X 1J2
Trading code ordinary shares: OGC
Australia
Australian Stock Exchange Limited
Level 4, Stock Exchange Centre
20 Bridge Street, Sydney
New South Wales 2000, Australia
Trading code ordinary shares: OGC
Trading code listed options: OGCO
New Zealand
New Zealand Stock Exchange
ASB tower, 2 Hunter Street
Wellington, New Zealand
Trading code ordinary shares: OGC
Website
www.oceanagold.com
Investor Relations
T: +61 3 9656 5300
