OceanaGold works diligently on Didipio

A resident holding out in Didipio, Philippines: sign reads "keep out - project area". Source: Mines and Communities

On Monday, the price of gold traded above $1,920 an ounce which marked another record setting day for gold bullion. The record was set after the Swiss National Bank announced it would imposed an exchange rate cap on the soaring Swiss franc to stave off a recession. The Swiss National Bank intends to keep the franc at or above 1.20 to the euro by effectively buying unlimited quantities of other currencies. Profit-taking later pushed bullion down more than $50 the same day and, today, traded briefly below $1,800 an ounce.

In response to the Swiss National Bank’s move, Peter Fertig, a consultant for Quantitative Commodity Research stated, “All in all, Switzerland is now on a quantitative easing policy in the foreign exchange markets. If the Swiss franc is no longer a preferred safe haven due to intervention by the SNB, it will have (a positive) impact on the demand for gold.” And Frank McGhee, head of precious metals trading at Integrated Brokerage Services in Chicago said, “I think gold is headed for $2,000.”

Record gold prices are having a positive effect on many junior and intermediate gold producers. Alacer Gold (TSX:ASR), IAMGOLD (TSX:IMG) and Banro Corporation (TSX:BAA), which is set to head into production later this year, are all trading at or near record highs. But record highs in the price of gold have not translated into “golden days” for some junior gold miners. OceanaGold (TSX:OGC) has yet to make its move despite the fact that earlier today the company provided a progress update on construction activities at the Didipio project located in the Philippines.

Mick Wilkes, managing director and chief executive officer, commented, “We continue to make good progress on construction activities at Didipio, with the key milestone of pouring first concrete on schedule in November, 2011. Mining activity is on track to commence in January, 2012, and we expect to commission the process plant in fourth quarter 2012. This project will transform OceanaGold, producing on average 100,000 ounces of gold and 14,000 tonnes of copper at cash costs net of byproduct credits of $356 (U.S.) per ounce of gold over a 16-year mine life.”

Oceana’s experience at Didipio, located 250 km north of Manila, has been nothing short of a PR nightmare. The company has faced stiff opposition from international human rights groups, such as Oxfam Australia who say that local indigenous peoples are being forced off their land for the project. The opposition actually began in June, 2008 when local residents filed a complaint with the Phillipino Commission on Human Rights (CHR), accusing OceanaGold’s subsidiary in the Philippines of setting on fire and bulldozing 187 houses in the village without a court order. CHR later urged the government to withdraw OceanaGold’s mining rights to the project.

Despite the torrid affair, OceanaGold posted record sales and earnings from its established mines in New Zealand in 2010 and continues to work diligently towards getting the Didipio project off the ground.

Mike Luft

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