Oceana Gold to put pit into 'care and maintenance' while Barrick faces writedown of up to US$5.5b on project.

Plunging gold prices have forced miners to change their plans, with Oceana Gold moving to mothball an open pit on the West Coast while the world's biggest miner, Barrick, has taken a multi-billion dollar hit on one of its projects and axed 30 per cent of its corporate staff.

In Waihi, Newmont says it is watching the gold price but is pushing ahead with seeking final approval for its big new underground project in the town. Its Denver and Perth offices had laid off staff, and while it had not shed any of its employees at Waihi, some contractors had lost jobs as projects came to an end.

The spot gold price has fallen by 33 per cent since late 2011, dipping below US$1200 ($1549) on Friday, its lowest price in three years.

It has been hit by a widespread sell-off among institutional investors, who have increasingly turned to the yields offered by stocks. The Federal Reserve's announcement of how it will unwind its quantitative easing programme - which had increased the appeal of gold as an inflation hedge - has also damaged demand.


Inexperienced investors, attracted by the safe haven image of gold and able to buy easily through new commodity trading products, were also panicking and selling.

Oceana said the lifespan of its Reefton open cast mine would be reduced by two years and the mine put into "care and maintenance" by mid-2015.

In a statement to NZX, Oceana chief executive Mick Wilkes said although gold production at Reefton would be reduced by about 110,000 ounces for the period 2015-2017, significant cost and risk reductions would be achieved by the revised plan, resulting in about $40-45 million being cut from the capital budget over the next two years.

"Mining operations must generate sufficient risk-weighted returns in order to remain sustainable and, unfortunately, the decline in the gold price over the past two months has eroded much of the profitability at Reefton, which has led to this revised plan," Mr Wilkes said yesterday.

The mine employs 260 staff.

Oceana shares are trading nearly 70 per cent down on a high of $4.50 last October although they lifted after the announcement last week.

Craigs Investment Partner broker Peter McIntyre said plans to put Reefton into care and maintenance was a clever move, to cushion Oceana from the risks ahead.

"Doing nothing was not an option. This is a smart move. It's proactive leadership by management to continue operating [elsewhere] in what is a bear market for gold," he said.

Canadian-based Barrick Gold is slowing the construction of its massive Pascua-Lama project in the Andes Mountains and will likely take a writedown of between US$4.5 billion and US$5.5 billion in the second quarter on the project.

In Waihi, Newmont is preparing for an Environment Court case to have initial approval for its Correnso underground mine upheld. A spokesman said yesterday the company remained committed to the project.

"Although we pay attention to the gold price [it] is not the only determinant of how we do our business. We run on a rolling average of two to three years."

Capital spending and operating expenditure at Correnso would add up to about $1 billion.

Two existing mines, including the Martha open pit, were scheduled to close in two years' time.

- additional reporting Otago Daily Times