PERTH (miningweekly.com) – Dual-listed gold miner OceanaGold this week announced that it would suspend operations at its Reefton gold mine, in New Zealand, as the gold price declined.

The ASX- and TSX-listed miner said that the company’s board of directors had decided to defer a final cutback at the Globe Progress pit, resulting in a two-year reduction in the mine schedule, and the mine transitioning to a care-and-maintenance phase by mid-2015.

“OceanaGold has enjoyed strong support from the local and regional communities as well as the Department of Conservation since gold mining restarted at Reefton in 2006,” said MD and CEO Mick Wilkes.

“During this time, we estimated that around NZ$45-million of direct and indirect benefits are derived from the Reefton mine annually, for the West Coast region alone.”

Wilkes noted that despite the upside, mining operations had to generate sufficient risk-weighted returns in order to remain sustainable, adding that the decline in the gold price over the past two months had eroded much of Reefton’s profitability.

“While we are hopeful for an improved gold environment, we have taken the necessary steps to ensure a sustainable and profitable operation at Reefton over the next two years, and we will continue to evaluate other opportunities across the goldfield, including underground opportunities at the Globe Progress pit and historic Blackwater mine,” Wilkes said.

He noted that OceanaGold would maintain its current access arrangements with the Department of Conservation until 2019, and would start rehabilitation of areas not expected to be disturbed in the future.

The Reefton plant and permanent equipment would be let in place during the care-and-maintenance period, while OceanaGold evaluated other opportunities for the operation.

Although gold production at Reefton would be reduced by some 110 000 oz for 2015/17, cost and risk reductions would be achieved under the new revised plan, which OceanaGold said would result in around NZ$40-million to NZ$45-million of capital reductions over the next two years.

Furthermore, OceanaGold has entered into a zero-cost collar hedging programme over an estimated production of 115 650 oz during the two-year period.

This would entail a series of bought gold put options creating a floor of NZ$1 600/oz being established for 115 650 oz, starting in July 2013 and continuing until June 2015.