Impact: Mick Wilkes, of OceanaGold, which is to increase gold production by 50 per cent with its Didipio deposit. Photo: Luis Enrique Ascui
IF THERE'S a sweet spot in the mining industry right now, Mick Wilkes must be pretty close to it.
As the gold price continues rising towards record highs, Mr Wilkes' company OceanaGold is about to increase production of the yellow metal by 50 per cent with one of the cheapest new mines on the planet.
In what looms as a triumph over the prophets of doom, OceanaGold is within weeks of first production at the highly prospective - but long hamstrung - Didipio deposit in the Philippines.
Known to the mining sector since its discovery in the late 1980s, Didipio has endured a painstaking journey to development, encountering enough hurdles for some observers to declare it cursed and bound to remain in the ground forever.
But as he prepares to bring it into production, Mr Wilkes shows no sentimentality for those previous perceptions of Didipio.
''Cursed is a figment of the imagination of people who make commentary on rumours … when you analyse the reasons why it has been around 25 years it is completely understandable,'' he said, detailing Didipio's struggles through funding crises, reforms to mining laws, ownership changes, cost blowouts and general bad timing.
''There are examples around the world of unloved projects that are only unloved by the market - the gold and the copper are still there in high quantities and it can make a lot of money, and the trick is to be able to see your way through the process.''
OceanaGold is now 95 per cent of the way through that process: Didipio is now in commissioning and first ore is expected to be milled before the end of November.
Commercial production is due in the first quarter of 2013.
Copper credits will ensure gold production at the mine has a cash cost below zero dollars for the first six years.
Over the mine's 16-year life, the average cost of production will be $US370 per ounce, which, according to Citi Research, will place it among the cheapest 1 per cent of mines in the world.
The low cost will offset the high cost of production at OceanaGold's New Zealand mines and local investors seem to have caught on to the transformative impact Didipio is about to have.
OceanaGold's Australian shares have almost doubled over the past four months and at Friday's price of $3.24 they are close to their highest level for more than two years.
''The market is starting to believe that the project is real,'' Mr Wilkes said.
When asked if the best of the share price run had passed, Mr Wilkes said there was reason to expect more gains in the near future.
''When you are on the development curve there are different investors who take different risks, so when Didipio is fully bedded down there will be another set of investors, longer-term investors, who will join the party,'' he said.
''We are not there yet so there is still upside in the share price in terms of that development risk.
''There's also upside in the gold price, which continues to rise based on uncertainty in the world and the printing of money in the US.''
Fund managers at BlackRock Inc, the world's biggest investor in resources projects, might yet prove him right.
On their visit to Melbourne last week, BlackRock's Catherine Raw and Olivia Ker said while they did not hold shares in OceanaGold, the stock was increasingly on their radar.
Ms Raw said there could yet be disappointments as the ramp-up of Didipio unfolds but the quality of the deposit was unquestionable.
''As the ramp-up of Didipio moves forward then it will become more and more in focus for us,'' she said.
Citi rates OceanaGold as a ''buy'' for those with an appetite for risk.