Photographer: Andrey Rudakov/Bloomberg

Miner Stung by Philippines Spat Eyes Growth in Trump's U.S.

  • OceanaGold says mine crisis to cool investment in Asian nation
  • Producer seeking to raise output at its new U.S. gold mine

OceanaGold Corp. is targeting an expansion of its new gold operation in the U.S. amid a dispute between mining companies and President Rodrigo Duterte’s government in the Philippines. 

“There has been significant damage done to the reputation of the Philippines as a place to invest, and as a place for foreign investment, and I would put us in that category,” Chief Executive Officer Mick Wilkes said in an interview. “My investors would now prefer that they had less exposure to the Philippines than more exposure.”

In contrast, the company’s operation in South Carolina already fits in with President Donald Trump’s ‘America First’ ambitions, according to Wilkes. “It’s part of our formula -- local hiring, use local businesses, maximize the benefits to the local economy,” he said. About 84 percent of the site’s 314 employees are from the local community, according to a filing this month.

Duterte’s Environment Secretary Gina Lopez wants to close 23 of the 41 metal mines in the Philippines, and suspend a further five, including Melbourne-based OceanaGold’s Didipio gold and copper operation. The government’s actions will likely be a deterrent to additional project spending by OceanaGold as well as other foreign miners and businesses, Wilkes said.

For a QuickTake Q&A on the country’s mining crisis, click here.

OceanaGold, the fourth-largest Australian gold producer by market value, last month filed an appeal against the suspension order and is continuing production as normal from Didipio, among the world’s lowest cost gold mines. It’s committed to retaining the asset and supports the nation’s efforts to improve the mining sector, Wilkes said. Lopez, a campaigner-turned-minister, argues the industry damages the environment and typically fails to do enough to alleviate poverty in local communities.

Philippine lawmakers ended a confirmation hearing Tuesday on Lopez without reaching a decision, prolonging uncertainty over her plans to close mines with a next hearing likely in May. A separate government review of mines threatened with closure or suspension could take as long as three months, Wilkes said in the interview Wednesday.

First gold was poured at OceanaGold’s Haile operation in South Carolina, where the company has the backing of key local officials, including Nikki Haley, now U.S. Ambassador to the United Nations and previously the state’s governor, according to Wilkes.

“It’s certainly an easier place to operate and we have got a strong relationship with the government and the community there, that bodes well for the future,” Wilkes said. OceanaGold expects Haile to produce about 150,000 to 170,000 ounces of gold in 2017 and is targeting an expansion to lift annual output to as much as 250,000 ounces after 2020.

Wilkes also expects to maintain production levels in New Zealand, where the company has two operations, supporting total annual output for the producer of 500,000 ounces to 600,000 ounces through 2030, he said.

OceanaGold advanced 4.8 percent to A$3.97 in Sydney trading Thursday after the U.S. Fed raised its benchmark rate as inflation approaches a 2 percent target. The producer has fallen 9 percent since the Philippines first announced plans to suspend some mines last September.

Factors including inflation and uncertainty over European elections will support higher gold prices, which could rise to $1,350 to $1,400 an ounce over the next 18 months, according to Wilkes. Bullion for immediate delivery traded at $1,227.08 an ounce at 5:48 p.m. in Sydney on Thursday, according to Bloomberg generic pricing.

The producer, which has completed acquisitions worth about $570 million in the past two years, could seek to continue to add to its portfolio. “To get another operation, or one or two projects, in North America or in Australasia would be great,” Wilkes said.

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