OceanaGold Expands Down Under with Ausgold Buy
Cashed up producer adds fifth asset
OceanaGold Corporation (TSX/NYSE: OGC) has announced the US$549 million acquisition of Australian developer Ausgold (ASX: AUC).
Ausgold shareholders will receive 0.03365 of an OceanaGold share for each Ausgold share held, implying a total offer value of A$1.36 per Ausgold share, a 28% premium to the company’s Friday closing price.
Ausgold shareholders can also choose to receive a portion of the consideration in cash, subject to scale-back based on a maximum available cash pool for the transaction of A$194 million.
The Ausgold board is unanimously recommending the deal, while the company’s largest shareholder with 7.7%, Dundee Corporation (TSX: DC.A), has agreed to vote in favour of the deal.
Fifth asset
The acquisition will give OceanaGold ownership of the advanced 2.44 million ounce Katanning gold project, 275km southeast of Perth in Western Australia.
“This transaction will add to our existing growth profile with the addition of a high-quality fifth asset to our portfolio in one of the world’s premier mining jurisdictions,” OceanaGold CEO Gerard Bond said during a conference call.
Ausgold had been advancing the final stages of the permitting process and pre-development activities have been advancing.
The company was targeting a final investment decision by the end of this year and first gold in mid-2028.
An updated definitive feasibility study, released in December 2025, forecast capital costs of A$355 million for a 3.6 million tonne per annum open pit operation with a 10-year life.
The study outlined production of 120,000 ounces of gold per year, including average gold production of 143,000ozpa in the first four years at all-in sustaining costs of A$2157 an ounce.
At a gold price of A$4300/oz, the project would generate post-tax cashflow of A$1.5 billion, has a net present value (5% discount rate) of A$1.03 billion, an internal rate of return of 52.4% and a 17-month payback period.
Bond said OceanaGold would target first production from Katanning in 2009, giving it time to optimise the project.
A full development update will be provided when the transaction closes, which is expected in December.
‘Small but meaningful’
OceanaGold is no stranger to acquiring development assets, picking up Didipio in the Philippines in 2006 and bringing it into production in 2013, and acquiring Haile in North Carolina in 2015 and reaching production in 2017.
The company has US$655 million in cash, which is projected to grow to US$2.1 billion by the end of 2029 on consensus free cashflow estimates, after taking current buyback commitments and dividend levels into account.
OceanaGold has previously said it was looking for acquisition opportunities.
“If I widen the lens on how we were approaching growth, we were looking at projects where we can add value in in areas that we currently operate: USA, New Zealand, Philippines, or Australia or Canada,” Bond said.
“This is a development project, which, as you can see from how developers trade in the market, sits at a discount, and we were able to acquire this at a P/NAV in the order of 0.4, which is entirely consistent with developer discounts.
“We’re paying a market clearing premium to get it into the portfolio, and we think by getting something at this price at this stage of its development, we are able to add the most amount of value to OceanaGold shareholders.
“When we buy something that’s an operating asset, it’s very competitive, and you can find yourself having to pay top dollar.”
Bond said as well as project execution, the company saw the potential to add value through exploration, with Ausgold holding more than 3000 square kilometres of ground.
“In terms of what this means, it’s relatively small for us to acquire, given the financial strength that we have, but it’s meaningful as well,” Bond said.
“It’s a 100,000 ounce-plus producer – that’s anywhere between 15-20% of our annual production in terms of what it represents to our total portfolio, and it comes online at a really nice time for us.”
Bond added that there would be no change to the company’s existing development plans, which include the high-grade Waihi North project in NZ.
“We can still pay dividends. We can still return capital to shareholders by our buyback program.”
First Aussie asset
Remarkably, Katanning will be OceanaGold’s first asset in Australia, despite its extensive history there.
Formed in New Zealand in 1989 shortly before its Macraes mine started operating, the company became Australian domiciled in 2003 and listed on the ASX in 2004.
It redomiciled to Canada in 2007 as part of its TSX listing but remained based in Australia, close to its two mines in NZ and Didipio.
In 2015, OceanaGold moved further into North America with the acquisition of Haile via the takeover of Romarco Minerals.
Shortly after Bond’s appointment in 2022, the company delisted from the ASX and moved its head office from Brisbane to Vancouver.
However, it has retained its Brisbane office where chief operating officer Bhuvanesh Malhotra, chief exploration officer Keenan Jennings, and the company’s broader technical team, are based.
“We already have a substantial office in Brisbane with a team that has deep Australian technical project development, planning, permitting, and exploration expertise, which is a real advantage as we seek to leverage that to advance Katanning,” Bond said.
“I would also stress that Western Australia sits inside OceanaGold’s existing operating day.”
As a result, Bond said the company had a good grasp of the competitive WA market and associated cost and labour pressures.
“We’ve taken a view on the current market. We’ve made our own estimates as to how things will play out in regard to inflationary pressures and the like, and we factored that all into our modelling, and still find that this has an attractive rate of return for OceanaGold shareholders,” he said.
“In some respects, it does have a locational advantage. A lot of people are drawn from around this area to go work in other mining parts of Western Australia, and we think we will be an attractive employer of choice for people that won’t have to drive so far or won’t have to fly to go find work in in the industry.
“So again, there’s a plenty of people in the mining industry in WA, but this is a very attractive jurisdiction for people to live in, and we’re confident of being able to attract them to OceanaGold for this.”